Vivian Shih-Ching Jeng, Kili Chi-Ling Wang, and Kahlen Wei-Hsian Hsiao 2017. The Impact of Concentration and Efficiency on Market Competition: An Analysis of Japanese Non-Life Insurance Industry. NTU Management Review, : 289-318. https://doi.org/10.6226/NTUMR.2017.JAN.RM104-019
Vivian Shih-Ching Jeng, Associate Professor, Department of Risk Management and Insurance, National Chengchi University
Kili Chi-Ling Wang, Professor, Department of Insurance, Tamkang University
Kahlen Wei-Hsian Hsiao, Account Officer, Department of Consumer Finance, CTBC Bank
Abstract
This study assesses the impact of concentration and efficiency on competition in the Japanese non-life insurance industry and use the fixed effect model to analyze data from 2001 to 2012. We use the Lerner index as a proxy for market power while measuring market concentration by using the Herfindahl-Hirschman index. The data envelopment analysis method is also used to evaluate the efficiency of insurance companies. We find that the higher the concentration level or firm efficiency, the higher the Lerner index of the firm. Further analysis shows that the positive relationship between concentration level and market power exists only in firms with higher market power. The strategy of firms with high market power tends to be specializing in main product lines such as auto lines, but diversification can raise the market power within low-market-power firms.
Keywords
market competition levelmarket powerconcentrationefficiencyJapanese non-life insurance industry