Determinants of Sharia Life Insurance Companies Productivity in Indonesia: Two-Stage Malmquist Productivity Index

Abstract

This study aims to measure the productivity and factors which affect the productivity of Islamic life insurance companies in Indonesia for the 2014-2019 periods.This study employed a Two-Stage Malmquist Productivity Index. The first stage was to measure productivity using the Malmquist Productivity Index (MPI) method. This study applied an output orientation and an intermediation approach. The second stage employed the panel data regression method to find out the factors affecting productivity.The results of MPI revealed that Islamic life insurance companies in Indonesia had not reached productivity. This is due to the low value of technological changes. The second stage yielded a result in which the solvency, interest rate, inflation, exchange rate, and production index variables indicated a significant effect on productivity of Sharia life insurance companies.The management of Sharia life insurance companies in Indonesia is expected to focus on technological innovation and product distribution to increase productivity. Above all, companies need to pay attention to the factors which affect the company productivity level. Several studies have used the MPI approach in measuring productivity in financial institutions. However, it is still uncommon to study Sharia Insurance companies and comprehensively use a two-stage MPI approach. This research can provide an overview for Insurance management in measuring its productivity levels and which variables significantly impact the Company's productivity.

Keywords: Sharia Life Insurance, Islamic Insurance, Life Insurance, productivity, Malmquist Productivity Index