This paper analysed the cost and profit efficiency of Ethiopian insurance industry over the period of 2011-2020.Two stage procedure was employed. The first method involves the estimation of profit and cost efficiency using the Stochastic Frontier Approach. In the next stage, the Tobit regression model was employed to investigate factors that determining difference in the efficiency of Ethiopian insurance industry. To obtain information relevant to the study, secondary data from the financial statement of insurance companies were used. In the study, all operational insurance companies in Ethiopia were taken as study population and purposive sampling method was used to select sample from the population. Accordingly, one state owned insurance company and 12 private owned insurance companies were incorporated in the study.rnResults of the Stochastic Frontier Approach indicated that the average level of cost and profit efficiency of insurance companies under the study period was 0.78 and 0.77 respectively, suggesting that there is a room that Ethiopian insurance industry, on average, could reduce their actual cost by 22% and increase their actual profit by 23% with the existing available resource during the sample period. The findings also indicate that both cost and profit efficiency tend to increase with annual average growth rate of 1.6% and 2.5% respectively over the study period. Besides, the study revealed that state owned insurance company was more cost and profit efficient than private insurance companies on average by 8 % and 16% respectively in the study period.rnIn the second stage , Tobit regression analysis indicated that gross written premium , investment income, price of labour, size of insurance , number of branch have positive and statistically significant relationship with both cost and profit efficiency of Ethiopian insurance industry. Moreover, age of insurance has a positive relationship with both cost and profit efficiency, however, the result is not statistically significant with cost efficiency. On the other hand, leverage ratio has a negative relationship with cost and profit efficiency but the result is not statistically significant with cost efficiency.