Competition reduces profitability: the case of the Indian life microinsurance industry

Document Type

Article

Publication Title

Geneva Papers on Risk and Insurance: Issues and Practice

Abstract

We aim to understand the effect of market and firm-level concentration on return on equity in the Indian life microinsurance industry (LMI). This research is one of the first attempts to empirically test structure–performance issues in India. Using data on 14 companies that remained active in the LMI market during 2009–2019, we demonstrate that firms in the Indian LMI market scored better on profitability measures whenever competitive pressures were lower. We calculate Herfindahl–Hirschman concentration indexes (HHI), market share and entropy measures and use panel data techniques to find a positive effect of concentration and a negative effect of market share. We conclude that LMI-specialised insurers in India perform better than diversified insurers.

First Page

383

Last Page

398

DOI

10.1057/s41288-020-00203-5

Publication Date

7-1-2021

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