EFFICIENCY MODELING, FINANCIAL PERFORMANCE AND RISK MITIGATION OF INSURANCE COMPANIES REGISTERED AT FINANCIAL SERVICES AUTHORITY: STOCHASTIC FRONTIER ANALYSIS AND DATA ENVELOPMENT ANALYSIS APPROACHES
The research objective is to model the efficiency, financial performance, and risk mitigation level between life insurance companies and general insurance companies through the Stochastic Frontier Analysis and Data Envelopment Analysis approaches. The study used 25 life insurance companies and 22 general insurance companies determined by the purposive sampling technique. Data analysis included descriptive analysis, Stochastic Frontier Analysis (SFA), Data Envelopment Analysis (DEA), Kruskal-Wallis, and Path Analysis. The results of the analysis show that there are differences in the level of efficiency, financial performance, and risk mitigation between life insurance companies and general insurance companies. General insurance has a higher efficiency level than life insurance, but life insurance has a higher level of financial performance than general insurance, and life insurance has a slightly lower level of risk mitigation than general insurance risk mitigation. Company categorization has a significant effect on the level of efficiency, financial performance, and risk mitigation. Financial ratios that affect efficiency are gross premium income and equity; while no financial ratios affect financial performance, the gross premium income also significantly affects risk mitigation. The results of the Kruskal-Wallis test confirm the differences between the SFA and DEA methods in identifying the level of efficiency and risk mitigation. However, no significant difference between the results of the calculation of financial performance using the SFA and DEA methods.
Efficiency, Financial Performance, Risk Mitigation