ABSTRACT

The solvency and continuous growth of insurance companies depends n their perfor
mance. The periodical evaluation of the Insurance companies attain importance, i
n view of their role played in the day to day activities of the general public a
nd their greater role in the development of the nation at large. A sound financi
al system is indispensable for a healthy and vibrant economy. The problem is tha
t traditional operational performance measures for insurers don’t provide the most
useful benchmarks of operating excellence. To overcome this problem an investi
gation of other financial industries for better approaches to identifying and be
nchmarking core operations excellence is helpful.
Insurers and reinsurers have traditionally struggled with knowing how
well they are performing in their core insurance functions on an apples-to-apple
s basis compared to competitors. Insurance company managers have long sought af
ter benchmarks that truly reflect industry best performance against which to mea
sure their firms’ performance. Brokers and agents increasingly need to evaluate i
nsurers in insightful ways to differentiate among them on various measures of “qua
lity” that align with their clients’ risk management and service needs. Investors i
n insurance companies want better measures of operating performance to use in se
lecting which companies they should invest in and to evaluate how efficiently an
d effectively their investments are managed. The difficulty has been that tradi
tional insurance performance and quality measures have not provided a true bench
mark of operational excellence against which to measure, in part because they do
not allow a true apples-to-apples comparison of performance across functions an
d among companies.
Performance comparisons based on traditional operational measures have always be
en subject to skepticism due to the lack of such a benchmark of best performance
. Just selecting the carrier with the highest or lowest level of a particular m
easure fails to account for a carrier’s unique competitive circumstances. Analyst
s and company managers question the validity of comparisons of operations using
traditional operating ratios or work and premium volumes citing problems that sk
ew the measures such as business mix, geographic mix, accounting policies, etc.
The fact is that a significant factor is missing from the measures commonly use
d in the industry that prevents them from overcoming these issues.
Over the period, the insurance sector has experienced a paradigm shift. Hence it
is high time to make performance appraisal of this sector. It is against the ab
ove background that the present study has been conducted. A study such as this i
s vital as enhancing the performance of insurance companies has been the key goa
l of financial sector reforms in many countries, and India is not an exception.
This project attempts to critically evaluate the performance of the various comm
ercial insurance company’s in India, using the CAERO model.
[A type of CAERO model, used to appraise the performance of Insurance companies]
Six insurance companies, one from the Government sector and others from Private
sector are taken up for analysis, for the period from 2005 – 2010. The study cons
ists of five sections – the first section deals with the introduction, the second
and third section deal with the model used and the research methodologies adopte
d. The fourth section describes about the data and the interpretation that have
been dealt about, with the conclusion and findings forming the fifth section.