Impact of technological innovation on efficiency — An empirical study of Indian life insurance industry

摘要

India has initiated reforms in the insurance sector with the passage of Insurance Regulatory Development Authority Bill by the Parliament in December 1999 and open up its insurance market to private competitors by the year 2000. New private companies have invested millions of money on information technology for the automation of the branches, bringing new technological innovative dimension to improve their efficiency through reducing the operational time and expenditure. Efficiency is the key concerns for the managers of the insurance companies to exist profitably in the business for long run in an ever-changing competitive environment. This paper focuses on the important issue, whether increasing investment on IT-infrastructure which is resulting a technological innovation in business operation of the private companies has a favorable impact on efficiency changes or not. It uses a panel data set of 12 private life insurance companies over the financial period 2006–2009 to evaluate their efficiency scores by applying Data Envelopment Analysis and calculating the scale efficiency. The results render increasing investment on IT-infrastructure has a positive impact on scale and technical efficiency change under constant and variable retunes to scale assumptions.