Application of Two-Stage DEA Technique for Efficiencies Measuring of Private Insurance Companies in Iran

Traditional DEA models ignore the internal process of production systems and are not able to identify the cause of deficiency in efficiencies measuring. At this research, traditional DEA model and two-stage DEA model were used to measure the efficiency of Iranian private insurance companies during 2007-2009. The results indicated that the traditional DEA model is not suitable for such kind of network systems. In marketing perspective, Melat and Hafez companies were efficient during the study period. But these two companies are not efficient due to weakness in investment sub-process. Wilcoxon’s signed-rank test was used to identify the main reason of weakness between efficiency average of marketing sub-process and investment sub-process with significant level of 0.01. The results indicated that the investment weakness is the main reason of insurance companies’ deficiencies during the studied period. Keywords: Two-Stage DEA, Insurance Industry, Marketing Sub-Process, Investment Sub-Process.