Scale Efficiency of the Life Insurance Corporation of India

Life Insurance Corporation of India (LICI) occupies an important place in the Indian financial sector in terms of providing finances to various socio-economic welfare and infrastructural schemes, inducing domestic capital formation, acting as a stabilizing agent in the stock market and providing insured protection against death and old-age economic insecurity. The present paper discusses into the issue of the scale economies and scale elasticity encountered by the Life Insurance Corporation of India in terms of cost and output at constant prices because we often want to compare the price of a goods today with what it was in the past or is likely to be in future. The main objective of this paper is to understand the concepts of cost, output and input in an insurance firm and then to discuss about estimation method of scale economies and scale elasticity of LICI. Lastly, I try to find out empirical results of Scale elasticity and aggregate scale economies during 1970-99 of LICI.