A Comparison of the Efficiency of Islamic and Conventional Insurers

Abstract

This analysis compares the cost efficiency of Islamic and conventional insurers operating in eight countries. We analyze data collected from 32 insurers using stochastic frontier analysis, data envelope analysis and a partial frontier approach with order-alpha free disposal hull. We compare the efficiency of Islamic and conventional insurers and conclude that Islamic insurers are no more or less efficient than conventional insurers in carrying out insurance activities. Any differences arise in the investment side of the business, where Shariah restrictions render Islamic insurers less efficient than their conventional counterparts.