Measuring Relative Efficiency of Life Insurance Companies with Data Envelopment and Fuzzy Data Envelopment Analysis

Insurance sector in India is one of the flourishing sectors of the economy. The insurance sector plays a vital role as it minimizes the risk and mobilizes the resource. Studying the efficiency of the insurance companies is highly important because it helps in determining how insurance companies respond to the various challenges and how many of them are likely to survive those challenges in the event of their occurrence. So, it becomes necessary to analyse the performance of life insurance companies in India with the application of Data Envelopment Analysis (DEA) and its extension Fuzzy Data Envelopment Analysis (FDEA). The empirical results of the Conventional DEA models and Fuzzy DEA models are computed to trace the performance of decision making unit at a possibility level. The computed fuzzy efficiency scores need to be ranked in order to determine how each DMU performs relative to the other DMUs in an uncertain environment. Chen and Klein (1997) ranking method were applied to rank the fuzzy numbers. To compare the two ranking methods the concept of Spearman rank correlation is applied. From this study the author infer that fuzzy DEA is more efficient than conventional DEA (CRS and VRS) Approach.