Technological and Efficiency Change on Indonesian Islamic Insurance Industry

Abstract

This study attempts to analyze the productivity level of Islamic insurance industry in Indonesia, both in terms of changes of its efficiency and also its technological. There are two things that are calculated in Malmquist index measurement that is catch-up effect and frontier shift effect. The catch-up effect measures the rate of change in relative efficiency from period 1 to period 2. Meanwhile the frontier shift effect measures the rate of technological change that is a combination of input and output from period 1 to period 2. The frontier shift effect is often called an innovation effect.
Findings from the results of the productivity index analysis are very interesting. In general, there has been an increase in the level of productivity of Islamic insurance institutions in Indonesia in the period 2014 to 2016, even though its very small. The increase in productivity growth (1.076) of Islamic insurance institutions in Indonesia is generally caused by technological change (1.078) instead of changes in efficiency (0.998). Thus the service of Islamic insurance institutions is needed which is more innovative in relation to the development of technology in the future.