Comparative Efficiency Analysis in Takaful Industry in Southeast Asia

Abstract

This research aims to evaluate the comparative efficiency of the Takaful industry in Southeast Asia, specifically in Indonesia and Malaysia, highlighting the sector's performance and operational benchmarks. Utilizing Data Envelopment Analysis (DEA), this research measures the efficiency of various Islamic insurance companies in 2019-2023 by comparing input variables such as Total Assets and Operating Expenses to output variables such as Revenue and Profit (Loss). The selection of input and output variables is adjusted to the intermediation efficiency approach used in the study. The results reveal that the efficiency trend in Islamic insurance companies in Indonesia and Malaysia tends to fluctuate. Besides, there is no Islamic Insurance company in Indonesia and Malaysia has achieved the maximum average efficiency score (1.00) during 2019-2023. PT Asuransi Sonwelis Takaful (0.93) reached the highest average efficiency score (0.93) among Islamic insurance companies in Indonesia. Meanwhile, Etiqa General Takaful Berhad was the Islamic insurance company in Malaysia that achieved the highest average efficiency score (0.99). This study also found that the efficiency level of Islamic insurance Companies in Malaysia tend to be higher than that of Islamic insurance companies in Indonesia. To achieve maximum efficiency level, Islamic insurance companies in Indonesia and Malaysia can improve their performance by concerning to the Revenue and Profit as the input variables, which are the largest sources of inefficiency in Islamic Insurance companies in Indonesia and Malaysia respectively. Islamic insurance companies in Indonesia and Malaysia should focus on improving efficiency through regular performance evaluations and product innovation to enhance financial inclusiveness and expand their reach. Regulators and academics are encouraged to support this effort by monitoring industry performance, addressing operational challenges, and conducting further research to provide comprehensive insights into the efficiency of Islamic insurance companies.