Based on SFA, this paper estimates and calculates cost/profit efficiency, scale economy and their dynamic changes for China insurance industry from 1996 to 2005, and analyzes the impact of macroeconomic factors and market structure of the industry on the profit efficiency. The results show that the cost efficiency of native insurance companies is higher than that of foreign and joint veuture insurance companies, but there is no significant profit efficiency difference between the two kinds of companies. The foreign and joint veuture insurance companies have a higher scale economy than that of native companies, and the scale economy of the ＂big four＂ decreases year by year. For macroeconomic factors, the monetization of the economy, rigid control on finance, income inequality, and excessive competition in the insurance market all have significantly negative effects on the profit efficiency of China insurance industry.
The Journal of Quantitative & Technical Economics