Evaluation of the performance of Iran's insurance agencies in Gilan province by using data coverage analysis technique with unfavorable output

Dissertation for Master's degree (M.A.)

Abstract

Insurance sales network is one of the most important parts of insurance companies, because on one hand, it provides the income from insurance operations through the sale of insurance products and receipt of relevant insurance premiums, and on the other hand, this unit is in close contact with customers, and how this unit interacts with customers in terms of sales, repeat purchases, and recommendations to others. It has a significant impact. Among the various pillars, sales networks, insurance agencies are of double importance in terms of number and geographical extent. Therefore, their performance can have a tremendous impact on the vision, attitude and understanding of insurance policyholders towards the insurance company. Therefore, it is very important to evaluate the performance of insurance agencies in order to know their quality and performance. In this research, the performance of 60 representatives of the Iran Insurance Joint Stock Company operating in Gilan province, whose monthly fees are between 20 and 70 million rials, was investigated with two methods of coverage analysis of BCC-O data by considering the unfavorable output (loss ratio) as input and the second method by considering the unfavorable output as output using the Mehrgan model. The information related to the operational and personnel costs of the representatives was obtained from the representative offices, and the values ??related to the insurance premium and the calculation of the loss coefficient were obtained from the information of the accounting database of Iran Insurance Company of Gilan Province. According to the results obtained with both methods, 14 agents were effective and 46 agents were ineffective. The difference between the two methods is in the amount of efficiency of the representatives, which indicates that in the second method, taking into account the unfavorable output, the results are more accurate. At the same time, other representatives can reach a desired level of efficiency by setting efficient representatives as a reference (model) and delivering their inputs and outputs to the proposed virtual units or image points. Insurance representatives should increase the insurance premiums received from insurers with full knowledge of the insurance industry and market, in order to reach an acceptable level of efficiency. Keywords: data coverage analysis, efficiency, sales network, insurance industry, adverse output. Insurance is a tool that, in addition to compensating for economic losses caused by accidents, providing for the future and improving people's living standards, and creating a suitable and reliable platform for economic growth and development, brings peace of mind to the members of the society, and this peace, in turn, causes the dynamics of social life, the growth and flourishing of talents, and the increase of efficiency and productivity (Rastego, Habib, 2013). takes For this reason, the insurance industry accounts for a large amount of value annually, which is a very significant amount compared to the amount of other economic activities (Hajarian, Massoud, 2017).

Insurance exists in different societies in the form of various institutions and services, although in developing countries it has not been formed as an infrastructure phenomenon and with the expected dimensions. The development of the insurance industry in advanced countries has revealed the depth and vital dimensions of this industry and made it possible to achieve many economic goals.                                                                                                                   

Insurance companies try to provide services that are at a high level in terms of quantity and quality by optimally using the available facilities, and because these companies are public service providers and are considered the driving force of the society, if they are not checked, they will face the society from an economic and social point of view. The evaluation of insurance companies is done in order to learn about their performance and to be able to compare them and in this way to move in the direction of continuous improvement of their performance. This evaluation helps insurance companies in increasing awareness of the usefulness and quality of their activities and gives them the opportunity to identify problems and take the correct action before the problems become large.. In this chapter, after the statement of the problem, the necessity and importance of conducting research and the proposed research model based on the conducted studies are presented and the research questions and hypotheses are stated, then the research method will be explained.

Statement of the problem

Insurance industry can be considered as one of the valuable industries of every society which will in some way lead to the development of that society. and by covering the losses caused by the economic and development activities of the society, it also increases the motivation of investment (Javaherdashti et al., 2013). As a service sector, the insurance industry provides services to customers in order to generate profit. The research conducted on the performance of the insurance industry shows that the profit of this industry is not only obtained by providing insurance services, but insurance companies invest the premiums received through agencies, intermediaries and legal consultants to obtain profit. Therefore, the entire production process of these companies can be divided into two sub-processes of insurance premium receipt and profit generation (Hwang, 2008 & Kao). Therefore, the requirement for the increasing development of the insurance industry in the country is to expand the sale of insurance products of insurance companies. In addition to the above, since one of the goals of insurance companies is to make a profit, it is very important to emphasize the sales network of insurance companies.

One of the most important parts of the sales of any insurance company are its agents, insurance companies sell a large part of their products to customers through their agents. In financial institutions such as insurance and banks, whose activities are somehow based on cash or investment of customers, customer satisfaction is very important in gaining a competitive advantage and increasing their profitability. Since the representatives of insurance companies are in direct contact with the policyholders and the way they deal with them has a direct impact on the level of satisfaction and the customers' view of the company, therefore, determining a system for evaluating the performance of insurance company representatives is of particular importance.

In the last decade, with the advent of the information age and the lack of success of the companies under the industrial age, the need for a more complete performance measurement system than what was available arose. Because they only emphasized the financial dimension of the organization, which in today's world would never create a sustainable competitive advantage for the organization. Therefore, one of the basic concerns of today's organizations is to achieve a comprehensive, reliable and flexible performance evaluation method, so that with its help, they can obtain accurate and sufficient information about their current position and learn from past mistakes with a view to the future. Despite the great importance of performance evaluation, most of the evaluations are based on traditional attitudes. This traditional approach includes only financial issues and evaluates the consequences of past performances, while in the modern perspectives of performance evaluation, they focus on the growth, development and improvement of the evaluated capacity (Mirzaei, 2013). Therefore, this question is always raised about the performance of insurance companies, to what extent and degree of efficiency do the sales network of insurance companies operate? Calculating the efficiency of production systems is one of the important tasks of managers for control and planning. One of the widely used methods to measure the relative efficiency of a set of production systems or decision making units with multiple inputs and multiple outputs is Data Envelopment Analysis (DEA) (Kao, 2009). This method does not require the estimation of the production function and by combining all the units under investigation, it creates a virtual unit with the highest efficiency and measures the inefficient units with it (Mehrgan, 2011, p. 31). For the first time, Farrell [3] in 1957 was able to measure the efficiency for a production unit by presenting the frontier method. The unit considered by Farrell for measurement included one input and one output (Farrell, 1957). Later, in 1978, Farrell's view was developed by Charnes, Cooper and Rhodes[4] and presented the CCR model, which had the ability to measure efficiency with multiple inputs and multiple outputs and was among the models of constant returns to scale (Charnes et al, 1981).