Corporate Financial Performance Analysis in Insurance Industry with the Aid of LOPCOW-RANCOM-RAWEC Model: The Case of Sompo Insurance

Abstract

Purpose - The application of MCDM approaches in the insurance industry contributes to a more objective assessment of performance, the systematic identification of organizational strengths and weaknesses, the efficiency-oriented restructuring of operational processes, and the rationalization of strategic decision-making mechanisms. In this context, MCDM-based analyses serve as a decision support system for the top management of insurance companies, enabling them to establish an optimal balance between profitability and risk, and to develop a sustainable business model in the long term. This study aims to measure and rank corporate financial performance in the non-life insurance sector using the LOPCOW-RANCOM-RAWEC integrated model. For this purpose, the proposed decision-making approach is applied through a case study. This case study focuses on the corporate performance evaluation process of a company providing non-life insurance services. Design/methodology/approach - In the current study, ten financial performance criteria are determined for corporate financial performance analysis by considering previous studies in the literature. The importance weights of these performance criteria are calculated using the LOPCOW and RANCOM procedures. In addition, the ranking of decision alternatives is performed using the RAWEC method. Findings - According to the final weighting findings, the three most important criteria affecting the corporate financial performance of the relevant non-life insurance company are, respectively, loss premium ratio, retention ratio and the ratio of agency receivables to equity. The RAWEC ranking results reveal that the company showed its best performance in 2020, the year when the COVID-19 pandemic emerged. However, when the overall ranking results are examined, it can be said that the performance of the relevant company has been inconsistent over the years. Moreover, the effectiveness of the proposed decision-making approach was tested with various sensitivity and comparison analyses. The findings show that the proposed decision model produces reliable and robust results. Discussion - The measurement and evaluation of corporate financial performance in the insurance sector is of critical importance to industry managers, policyholders, regulatory authorities, policy makers and other stakeholders due to the significant benefits of insurance companies at both micro and macroeconomic levels.