Decomposing Total Factor Productivity of Non-life Insurance Firms in Tanzania

The purpose of this study is to decompose the total factor productivity of non-life insurance firms in terms of technical efficiency change (TECH) and efficiency change (EFFCH). The study also focuses on factors deriving productivity change of the insurance sector in Tanzani. Malmquist Productivity Index (MPI) model was employed in 19 non-life insurance firms over the period 2014/15–2015/16. Findings revealed that 94.7% of all firms were experiencing improvement in productivity change by 54.6%, while one firm was experiencing regress in productivity change by 1.2% over the study period. As far as efficiency change and technical efficiency change, only one firm was experiencing deterioration in each category by 5.8% and 1.2% respectively. It was further revealed that in the year 2014/15–2017/18 insurance sector was performing better (with productivity improvement of 90.6%) compared to the remaining year under review. The efficiency change largely derived productivity of insurance sector (catch up effect). The study suggests that non-life insurance firms in Tanzania should redesign and improve their existing production technology as it is the leading performance deriving factor. Findings will be useful to insurance managers and regulatory organs who wish to make smart and informed decisions to support policy implementation.