The Importance of the Efficiency of Mutual Life Insurers: A Comparison to Stock Life Insurers

Research background: Mutual companies are a major component of the life insurance industry worldwide and moreover are growing in importance. Efficiency, potentially affected by whether a life insurer company is mutual or stock, can determine how well said companies perform.

Purpose: The aim of this paper is to demonstrate the importance of examining the efficiency of mutual and takaful (similar to mutuals) life insurance companies.

Research methodology: This research coordinates 1) ideas regarding the size and importance of the mutual and takaful life industries worldwide, 2) theoretical aspects concerning how the efficiency of mutual/takafuls is expected to compare to that of stock insurers and 3) the outcomes of germane life insurance efficiency studies.

Results: The outcomes of life insurance efficiency studies tend to show that, in total, stock insurers are more efficient than mutuals apart from one conspicuous element. As mutuals are substantial within several of the world’s largest life markets and the global life industry their being inefficient can be exceedingly negative. The overall conclusion is that such inefficiency can lead to dire economic problems so it is imperative to investigate the efficiency of mutuals/takafuls and perhaps the one element of stocks.

Novelty: This article is the first to investigate the results of mutual/takaful life insurer efficiency studies in concert with the abovementioned theory and draws a vital conclusion regarding mutual/takaful life insurer inefficiency.