Life-insurance Efficiency in China:A Comparison of Foreign and Domestic Firms

The Chinese life-insurance industry has experienced major structural changes in recentyears, primarily because of increasing demand and the entry of foreign insurers. Althoughthe market is clearly booming, the efficiency of its growth and development is unclear. In thispaper, we evaluate the efficiency of life insurers operating in China and compare foreignfirms with domestic firms. We find that foreign insurers have not brought efficiency into theChinese market, and that the market is still dominated by domestic giants. However, the gapbetween foreign insurers and domestic insurers is narrowing. After testing hypothesesregarding scale economy, technical progress and potential improvements, we discuss severalissues of importance to life insurers, market investors and government regulators.