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Abstract
This study aims to measure the efficiency of Takaful companies in Southeast Asia and the Middle East region. The efficiency level of Takaful companies in Southeast Asia and the Middle East region was examined from 2016 to 2020. The sample consisted of 23 companies in Indonesia, 14 in Malaysia, three in UEA, and 31 in Saudi Arabia. The efficiency value of Islamic insurance companies was calculated using the Stochastic Frontier Analysis (SFA) method, afterward, the Mann-Whitney test was performed. The results showed that the efficiency median value of the companies in Southeast Asia was lower compared to the Middle East with respective values of 0.26 and 0.32. It was concluded from the results of the Mann-Whitney test that the differences in the median efficiency value of Islamic insurance companies in Southeast Asia and the Middle East were not significant. The novelty of this research is to provide new and significant information on the performance of Takaful Companies during 2016-2020. The results of this study have significant implications for policymakers in each of the countries examined to understand the efficiency condition of Takaful companies in the region. Furthermore, policymakers in Southeast Asia need to promote low-efficiency Takaful operators to expand their business. The lowest efficiency score for Takaful companies is in Indonesia, especially for small Takaful companies. The implication is that the Indonesian government or related agencies need to increase the popularity of Takaful companies among the public so that income and efficiency increase.
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Copyright (c) 2022 Nur Kholis, Rakhmawati
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References
Abdullah, S. (2012). Risk management via takaful from a perspective of maqasid of shariah. Procedia - Social and Behavioral Sciences, 65, 535–541. https://doi.org/10.1016/j.sbspro.2012.11.161
Acharya, V. V., Almeida, H., & Campello, M. (2013). Aggregate risk and the choice between cash and lines of credit. The Journal of Finance, 68(5), 2059–2116. https://doi.org/10.1111/jofi.12056
Akhtar, M. H. (2018). Performance analysis of Takaful and conventional insurance companies in Saudi Arabia. Benchmarking: An International Journal, 25(2), 677–695. https://doi.org/10.1108/BIJ-01-2017-0018
Akhter, W., Pappas, V., & Khan, S. U. (2017). A comparison of Islamic and conventional insurance demand: Worldwide evidence during the Global Financial Crisis. Research in International Business and Finance, 42, 1401–1412. https://doi.org/10.1016/j.ribaf.2017.07.079
Al-Amri, K. (2015). Takaful insurance efficiency in the GCC countries. Humanomics, 31(3), 344–353. https://doi.org/10.1108/H-05-2014-0039
Al-Amri, K., David Cummins, J., & Weiss, M. A. (2021). Economies of scope, organizational form, and insolvency risk: Evidence from the takaful industry. Journal of International Financial Markets, Institutions and Money, 70, 101259. https://doi.org/10.1016/j.intfin.2020.101259
Al-Fori, A., & Gani, A. (2022). The effect of Islamic finance on trade in insurance services in selected countries in the Middle East region. Journal of Financial Economic Policy, 14(6), 778–795. https://doi.org/10.1108/JFEP-04-2022-0091
Almulhim, T. (2019). Analysis of Takaful vs. Conventional insurance firms’ efficiency: Two-stage DEA of Saudi Arabia’s insurance market. Cogent Business & Management, 6(1), 1633807. https://doi.org/10.1080/23311975.2019.1633807
Bansal, R., & Singh, D. (2021). Efficiency drivers of insurers in GCC: An analysis incorporating company-specific and external environmental variables. Cogent Economics and Finance, 9(1), Article: 1922179. https://doi.org/10.1080/23322039.2021.1922179
Baroroh, H. (2022). Comparative efficiency analysis of sharia insurance and conventional insurance in Indonesia. Jurnal Ilmiah Ekonomi Islam, 8(3), 3182–3188. https://doi.org/10.29040/jiei.v8i3.5952
Coelli, T. J., Rao, D. S. P., O’Donnell, C. J., & George E. Battese. (2005). An introduction to efficiency and productivity analysis (T. J. Coelli, D. S. Prasada Rao, C. J. O’Donnell, & G. E. Battese, Eds.). Springer US. https://doi.org/10.1007/0-387-25895-7_9
Coskun, A., Habibniya, H., & Keceli, Y. (2021). An efficiency analysis of takaful insurance industry: A comparative study. Journal of Asian Finance, 8(7), 111–0120. https://doi.org/10.13106/jafeb.2021.vol8.no7.0111
Hasanatina, F. H., Budiantoro, R. A., & Oktavia, V. (2021). Two stage analysis: Analisis technical efficiency pada perusahaan asuransi jiwa konvensional dan syariah, 2012-2020 [Two stage analysis: Analysis of technical efficiency in conventional and sharia life insurance companies, 2012-2020]. Proceedings Ihtifaz: Islamic Economics, Finance and Banking, 149–162. http://seminar.uad.ac.id/index.php/ihtifaz/article/view/6057
He, Z., & Manela, A. (2016). Information acquisition in rumor-based bank runs. The Journal of Finance, 71(3), 1113–1158. https://doi.org/10.1111/jofi.12202
Indrarini, R., Canggih, C., & Rusmita, S. A. (2019). Efficiency determinants of Islamic insurance in Indonesia. KnE Social Sciences, 175–175. https://doi.org/10.18502/kss.v3i13.4204
Ismail, N., Alhabshi, S. O., & Bacha, O. (2011). Organizational form and efficiency: The coexistence of family takaful and life insurance in Malaysia. Journal of Global Business and Economics, 3(1), 122–137. https://econpapers.repec.org/RePEc:grg:01biss:v:3:y:2011:i:1:p:122-137
Jaloudi, M. M. (2019). The efficiency of Jordan insurance companies and its determinants using DEA, slacks, and logit models. Journal of Asian Business and Economic Studies, 26(1), 153–166. https://doi.org/10.1108/jabes-10-2018-0072
Kader, H. A., Adams, M., Hardwick, P., & Kwon, W. J. (2014). Cost efficiency and board composition under different takaful insurance business models. International Review of Financial Analysis, 32, 60–70. https://doi.org/10.1016/j.irfa.2013.12.008
Kagan, J. (2021, July 21). What is takaful insurance and how does it work? [HTML]. Investopedia. https://www.investopedia.com/terms/t/takaful.asp
Karbhari, Y., Muye, I., Hassan, A. F. S., & Elnahass, M. (2018). Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market. Journal of International Financial Markets, Institutions and Money, 56, 71–92. https://doi.org/10.1016/j.intfin.2018.02.017
Kodde, D. A., & Palm, F. C. (1986). Wald criteria for jointly testing equality and inequality restrictions. Journal of the Econometric Society, 54(5), 1243–1248. https://www.jstor.org/stable/1912331
Lee, H. S., Cheng, F. F., Har, W. M., Nassir, A. M., & Razak, N. H. A. (2019). Efficiency, firm-specific and corporate governance factors of the Takaful insurance. International Journal of Islamic and Middle Eastern Finance and Management, 12(3), 368–387. https://doi.org/10.1108/IMEFM-06-2018-0187
Mayenkar, S. S. (2015, October 6). Global Takaful industry poised to be at $25.5b by 2020. Gulf News. https://gulfnews.com/business/global-takaful-industry-poised-to-be-at-255b-by-2020-1.1596226
Nasution, Z. (2021). Sharia insurance efficiency in Indonesia and Malaysia using the stochastic frontier approach analysis. Asian Journal of Islamic Management (AJIM), 3(2), 123–136. https://doi.org/10.20885/ajim.vol3.iss2.art5
Rabbaniyah, L., & Afandi, A. (2019). Analisis efisiensi perbankan syariah di Indonesia metode Stochastic Frontier Analysis [Analysis of the efficiency of Islamic banking in Indonesia using the Stochastic Frontier Analysis method]. Proceeding of Conference on Islamic Management, Accounting, and Economics (CIMAE), 200–211. https://journal.uii.ac.id/CIMAE/article/view/13149
Rubio-Misas, M. (2020). Ownership structure and financial stability: Evidence from Takaful and conventional insurance firms. Pacific-Basin Finance Journal, 62, 101355. https://doi.org/10.1016/j.pacfin.2020.101355
Rusydiana, A. S., & Nugroho, T. (2017). Measuring efficiency of life insurance instution in Indonesia: Data Envelopment Analysis approach. Global Review of Islamic Economics and Business, 5(1), 12–24. https://doi.org/10.14421/grieb.2017.051-02
Shaddady, A. (2022). Business environment, political risk, governance, Shariah compliance and efficiency in insurance companies in the MENA region. The Geneva Papers on Risk and Insurance - Issues and Practice, 47(4), 861–904. https://doi.org/10.1057/s41288-021-00232-8
Sunarsih, S., & Fitriyani, F. (2018). Analisis efisiensi asuransi syariah di Indonesia tahun 2014-2016 dengan metode Data Envelopment Analysis (DEA) [Analysis of the efficiency of Islamic insurance in Indonesia in 2014-2016 using the Data Envelopment Analysis (DEA) method]. Jurnal Ekonomi & Keuangan Islam, 4(1), 9–21. https://doi.org/10.20885/jeki.vol4.iss1.art2
Tuffahati, H., Mardian, S., & Suprapto, E. (2019). Pengukuran efisiensi asuransi syariah dengan Data Envelopment Analysis (DEA) [Islamic insurance efficiency measurement with Data Envelopment Analysis (DEA)]. Jurnal Akuntansi Dan Keuangan Islam, 4(1), 1–24. https://doi.org/10.35836/jakis.v4i1.27
Ulansari, D. R., & Septiarini, D. F. (2020). A comparative study of the efficiency of conventional and Sharia insurance in Indonesia. Jurnal Keuangan Dan Perbankan, 24(2), 202–213. https://doi.org/10.26905/jkdp.v24i2.3165
Wangi, D. M. & Darwanto. (2020). Analisis efisiensi asuransi umum syariah dan konvensional di Indonesia [Analysis of the efficiency of general sharia and conventional insurance in Indonesia]. Human Falah, 7(1), 85–102. https://doi.org/10.30829/hf.v7i1.5822
References
Abdullah, S. (2012). Risk management via takaful from a perspective of maqasid of shariah. Procedia - Social and Behavioral Sciences, 65, 535–541. https://doi.org/10.1016/j.sbspro.2012.11.161
Acharya, V. V., Almeida, H., & Campello, M. (2013). Aggregate risk and the choice between cash and lines of credit. The Journal of Finance, 68(5), 2059–2116. https://doi.org/10.1111/jofi.12056
Akhtar, M. H. (2018). Performance analysis of Takaful and conventional insurance companies in Saudi Arabia. Benchmarking: An International Journal, 25(2), 677–695. https://doi.org/10.1108/BIJ-01-2017-0018
Akhter, W., Pappas, V., & Khan, S. U. (2017). A comparison of Islamic and conventional insurance demand: Worldwide evidence during the Global Financial Crisis. Research in International Business and Finance, 42, 1401–1412. https://doi.org/10.1016/j.ribaf.2017.07.079
Al-Amri, K. (2015). Takaful insurance efficiency in the GCC countries. Humanomics, 31(3), 344–353. https://doi.org/10.1108/H-05-2014-0039
Al-Amri, K., David Cummins, J., & Weiss, M. A. (2021). Economies of scope, organizational form, and insolvency risk: Evidence from the takaful industry. Journal of International Financial Markets, Institutions and Money, 70, 101259. https://doi.org/10.1016/j.intfin.2020.101259
Al-Fori, A., & Gani, A. (2022). The effect of Islamic finance on trade in insurance services in selected countries in the Middle East region. Journal of Financial Economic Policy, 14(6), 778–795. https://doi.org/10.1108/JFEP-04-2022-0091
Almulhim, T. (2019). Analysis of Takaful vs. Conventional insurance firms’ efficiency: Two-stage DEA of Saudi Arabia’s insurance market. Cogent Business & Management, 6(1), 1633807. https://doi.org/10.1080/23311975.2019.1633807
Bansal, R., & Singh, D. (2021). Efficiency drivers of insurers in GCC: An analysis incorporating company-specific and external environmental variables. Cogent Economics and Finance, 9(1), Article: 1922179. https://doi.org/10.1080/23322039.2021.1922179
Baroroh, H. (2022). Comparative efficiency analysis of sharia insurance and conventional insurance in Indonesia. Jurnal Ilmiah Ekonomi Islam, 8(3), 3182–3188. https://doi.org/10.29040/jiei.v8i3.5952
Coelli, T. J., Rao, D. S. P., O’Donnell, C. J., & George E. Battese. (2005). An introduction to efficiency and productivity analysis (T. J. Coelli, D. S. Prasada Rao, C. J. O’Donnell, & G. E. Battese, Eds.). Springer US. https://doi.org/10.1007/0-387-25895-7_9
Coskun, A., Habibniya, H., & Keceli, Y. (2021). An efficiency analysis of takaful insurance industry: A comparative study. Journal of Asian Finance, 8(7), 111–0120. https://doi.org/10.13106/jafeb.2021.vol8.no7.0111
Hasanatina, F. H., Budiantoro, R. A., & Oktavia, V. (2021). Two stage analysis: Analisis technical efficiency pada perusahaan asuransi jiwa konvensional dan syariah, 2012-2020 [Two stage analysis: Analysis of technical efficiency in conventional and sharia life insurance companies, 2012-2020]. Proceedings Ihtifaz: Islamic Economics, Finance and Banking, 149–162. http://seminar.uad.ac.id/index.php/ihtifaz/article/view/6057
He, Z., & Manela, A. (2016). Information acquisition in rumor-based bank runs. The Journal of Finance, 71(3), 1113–1158. https://doi.org/10.1111/jofi.12202
Indrarini, R., Canggih, C., & Rusmita, S. A. (2019). Efficiency determinants of Islamic insurance in Indonesia. KnE Social Sciences, 175–175. https://doi.org/10.18502/kss.v3i13.4204
Ismail, N., Alhabshi, S. O., & Bacha, O. (2011). Organizational form and efficiency: The coexistence of family takaful and life insurance in Malaysia. Journal of Global Business and Economics, 3(1), 122–137. https://econpapers.repec.org/RePEc:grg:01biss:v:3:y:2011:i:1:p:122-137
Jaloudi, M. M. (2019). The efficiency of Jordan insurance companies and its determinants using DEA, slacks, and logit models. Journal of Asian Business and Economic Studies, 26(1), 153–166. https://doi.org/10.1108/jabes-10-2018-0072
Kader, H. A., Adams, M., Hardwick, P., & Kwon, W. J. (2014). Cost efficiency and board composition under different takaful insurance business models. International Review of Financial Analysis, 32, 60–70. https://doi.org/10.1016/j.irfa.2013.12.008
Kagan, J. (2021, July 21). What is takaful insurance and how does it work? [HTML]. Investopedia. https://www.investopedia.com/terms/t/takaful.asp
Karbhari, Y., Muye, I., Hassan, A. F. S., & Elnahass, M. (2018). Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market. Journal of International Financial Markets, Institutions and Money, 56, 71–92. https://doi.org/10.1016/j.intfin.2018.02.017
Kodde, D. A., & Palm, F. C. (1986). Wald criteria for jointly testing equality and inequality restrictions. Journal of the Econometric Society, 54(5), 1243–1248. https://www.jstor.org/stable/1912331
Lee, H. S., Cheng, F. F., Har, W. M., Nassir, A. M., & Razak, N. H. A. (2019). Efficiency, firm-specific and corporate governance factors of the Takaful insurance. International Journal of Islamic and Middle Eastern Finance and Management, 12(3), 368–387. https://doi.org/10.1108/IMEFM-06-2018-0187
Mayenkar, S. S. (2015, October 6). Global Takaful industry poised to be at $25.5b by 2020. Gulf News. https://gulfnews.com/business/global-takaful-industry-poised-to-be-at-255b-by-2020-1.1596226
Nasution, Z. (2021). Sharia insurance efficiency in Indonesia and Malaysia using the stochastic frontier approach analysis. Asian Journal of Islamic Management (AJIM), 3(2), 123–136. https://doi.org/10.20885/ajim.vol3.iss2.art5
Rabbaniyah, L., & Afandi, A. (2019). Analisis efisiensi perbankan syariah di Indonesia metode Stochastic Frontier Analysis [Analysis of the efficiency of Islamic banking in Indonesia using the Stochastic Frontier Analysis method]. Proceeding of Conference on Islamic Management, Accounting, and Economics (CIMAE), 200–211. https://journal.uii.ac.id/CIMAE/article/view/13149
Rubio-Misas, M. (2020). Ownership structure and financial stability: Evidence from Takaful and conventional insurance firms. Pacific-Basin Finance Journal, 62, 101355. https://doi.org/10.1016/j.pacfin.2020.101355
Rusydiana, A. S., & Nugroho, T. (2017). Measuring efficiency of life insurance instution in Indonesia: Data Envelopment Analysis approach. Global Review of Islamic Economics and Business, 5(1), 12–24. https://doi.org/10.14421/grieb.2017.051-02
Shaddady, A. (2022). Business environment, political risk, governance, Shariah compliance and efficiency in insurance companies in the MENA region. The Geneva Papers on Risk and Insurance - Issues and Practice, 47(4), 861–904. https://doi.org/10.1057/s41288-021-00232-8
Sunarsih, S., & Fitriyani, F. (2018). Analisis efisiensi asuransi syariah di Indonesia tahun 2014-2016 dengan metode Data Envelopment Analysis (DEA) [Analysis of the efficiency of Islamic insurance in Indonesia in 2014-2016 using the Data Envelopment Analysis (DEA) method]. Jurnal Ekonomi & Keuangan Islam, 4(1), 9–21. https://doi.org/10.20885/jeki.vol4.iss1.art2
Tuffahati, H., Mardian, S., & Suprapto, E. (2019). Pengukuran efisiensi asuransi syariah dengan Data Envelopment Analysis (DEA) [Islamic insurance efficiency measurement with Data Envelopment Analysis (DEA)]. Jurnal Akuntansi Dan Keuangan Islam, 4(1), 1–24. https://doi.org/10.35836/jakis.v4i1.27
Ulansari, D. R., & Septiarini, D. F. (2020). A comparative study of the efficiency of conventional and Sharia insurance in Indonesia. Jurnal Keuangan Dan Perbankan, 24(2), 202–213. https://doi.org/10.26905/jkdp.v24i2.3165
Wangi, D. M. & Darwanto. (2020). Analisis efisiensi asuransi umum syariah dan konvensional di Indonesia [Analysis of the efficiency of general sharia and conventional insurance in Indonesia]. Human Falah, 7(1), 85–102. https://doi.org/10.30829/hf.v7i1.5822