Efficiency Measurement in Nepalese Non-Life Insurance Companies

A Hybrid Data Envelopment Analysis and Panel Regression Approach

Authors

DOI:

https://doi.org/10.58665/njiss.93

Abstract

Purpose: This study investigates the operational efficiency of Nepalese non-life insurance companies and examines the key determinants of efficiency, including the impact of recent mergers.

Design/methodology/approach: A hybrid methodology is employed. First, a data envelopment analysis (DEA) with variable returns to scale (VRS) evaluates relative efficiency across 14 non-life insurers from 2020 to 2024. Second, panel regression identifies firm-level drivers of efficiency, including profit margin, employee productivity, and investment intensity. Finally, a Difference-in-Differences (DiD) model assesses the effects of the 2023 merger cycle.

Findings: The average DEA efficiency score is 0.80, indicating moderate performance with substantial variation across firms. Profit margin and employee productivity positively influence efficiency, while excessive investment negatively affects performance. The DiD analysis demonstrates that mergers contributed a significant efficiency gain of 0.09, highlighting the potential benefits of consolidation in the sector.

Conclusion: Efficiency in Nepalese non-life insurers is strongly influenced by financial performance, workforce productivity, and prudent capital allocation. Mergers can enhance efficiency, although overinvestment may undermine operational gains.

Implications: Regulators, managers, and investors can leverage these insights to improve sectoral efficiency, optimize resource allocation, and inform investment and policy decisions.

Originality/value: This research integrates DEA, panel regression, and DiD approaches to provide a comprehensive efficiency assessment of Nepalese non-life insurers, offering both methodological rigor and practical relevance.

JEL: G22, C61, C23, L25

Author Biographies

Yadav Mani Upadhyaya, Saraswati Multiple Campus, Tribhuvan University, Nepal

Yadav Mani Upadhyaya, PhD, is an Assistant Professor of the Economics Department at the Faculty of Humanities and Social Sciences, Saraswati Multiple Campus, Tribhuvan University, Nepal. He earned his PhD degree from Tribhuvan University, Nepal. He has published numerous articles in both Scopus-indexed and non-indexed journals, focusing on macroeconomics and microeconomics. His research interests include banking, microfinance, government finance, insurance, and financial literacy.

Prem Bahadur Budhathoki, Saraswati Multiple Campus, Tribhuvan University, Nepal

Prem Bahadur Budhathoki, MPhil, is an Associate Professor and Head of Research Department at the Faculty of Management, Saraswati Multiple Campus, Tribhuvan University, Nepal. He earned his Master of Philosophy (MPhil) degree with a specialization in Finance from Purbanchal University, Nepal. He has published numerous articles in both Scopus-indexed and nonindexed journals, focusing on banking and insurance. His research interests include banking, government finance, insurance, and financial literacy. 

Shiva Raj Ghimire, Saraswati Multiple Campus, Tribhuvan University, Nepal

Shiva Raj Ghimire is an Assistant Professor at the Faculty of Management, Saraswati Multiple Campus, Tribhuvan University, Nepal. He holds a Master of Business Administration (MBA) from Tribhuvan University, Faculty of Management. Mr. Ghimire has published numerous articles in both Scopus-indexed, covering topics such as and non-indexed journals, covering topics such as banking, insurance, and economics. His areas of interest include emerging issues in banking, insurance, the national and international economy, and corporate finance.

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Published

2025-12-30

How to Cite

Upadhyaya, Y. M. ., Budhathoki, P. B. ., & Ghimire, S. . R. (2025). Efficiency Measurement in Nepalese Non-Life Insurance Companies: A Hybrid Data Envelopment Analysis and Panel Regression Approach. Nepalese Journal of Insurance and Social Security, 8(2), 46–56. https://doi.org/10.58665/njiss.93

Issue

Vol. 8 No. 2 (2025)

Section

Articles