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Mathematical Problems in Engineering
Volume 2012 (2012), Article ID 423524, 24 pages
http://dx.doi.org/10.1155/2012/423524
Research Article

A Two-Stage DEA to Analyze the Effect of Entrance Deregulation on Iranian Insurers: A Robust Approach

Department of Industrial Engineering, Iran University of Science and Technology, Narmak, Tehran 1684613114, Iran

Received 17 February 2012; Revised 5 May 2012; Accepted 29 May 2012

Academic Editor: Yi-Chung Hu

Copyright © 2012 Seyed Gholamreza Jalali Naini and Hamid Reza Nouralizadeh. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We use two-stage data envelopment analysis (DEA) model to analyze the effects of entrance deregulation on the efficiency in the Iranian insurance market. In the first stage, we propose a robust optimization approach in order to overcome the sensitivity of DEA results to any uncertainty in the output parameters. Hence, the efficiency of each ongoing insurer is estimated using our proposed robust DEA model. The insurers are then ranked based on their relative efficiency scores for an eight-year period from 2003 to 2010. In the second stage, a comprehensive statistical analysis using generalized estimating equations (GEE) is conducted to analyze some other factors which could possibly affect the efficiency scores. The first results from DEA model indicate a decline in efficiency over the entrance deregulation period while further statistical analysis confirms that the solvency ignorance which is a widespread paradigm among state owned companies is one of the main drivers of efficiency in the Iranian insurance market.