Market Structure And Business Efficiency Of Life Insurance

Market structure, business efficiency and the performance are always the mostimportant problems in the field of life insurance in China. This paper analyzes themarket structure of life insurance market and the influences of insurance marketaccess and withdrawal on this market, studies the market competition behaviors in lifeinsurance market, which include the design of products, making price and providingservices. Based on the model of DEA, this paper makes the empirical analysis of theopenness, the scale efficiency and the characteristics of market performance in lifeinsurance market. This paper constructs the multiple regression models, and therelationships among market structure, efficiency and performance are analyzed byusing this model. Lastly, this paper proposes some corresponding countermeasuresand suggestions, which include improving the mechanism of market access andwithdrawal, optimizing the market structure, regulating the market behaviors,increasing the efficiency and performance in the fields of life insurance. Theconclusions and innovations of this research are mainly listed in the followingaspects:Firstly, this paper studies the characteristics of the market structure in lifeinsurance industry. It finds out that compared with the developed countries, theindustry of life insurance in China is in the stage of growth and development. Thescale of assets and insurance premium has huge difference with developed countries.Insurance density, insurance depth and insurance assets account for a lower part ofGDP and financial assets. Market concentration degree gradually redu ced in Chinalife insurance industry, but this degree is still high. Due to this reason, this marketbelongs to the III type of oligopoly market structure. The homogenization of lifeinsurance products becomes a serious problem in life insurance industry. Theresearches on the mechanism of market access and withdrawal find out that theadministrative policies of market access and withdrawal are the most obvious barrierto the life insurance industry. This paper considers that if we can lower entry barriersand build the proper mechanism of withdrawal, it will be helpful to optimize themarket structure and improve the efficiency of resource allocation in life insuranceindustry. Secondly, this paper studies the competitive behaviors of market structure in li feinsurance industry. Four aspects, which include the factor influenced marketcompetition and the hierarchical structure of market competition, the behaviors ofproduct design in life insurance market, the behaviors of making price and providingservices in life insurance market, are explored in this paper. Fifty two life insurancecompanies are divided into different groups. Fifty companies, including twenty eightChinese funded life insurance companies and twenty foreign life insurance companies,belong to the large insurance companies. The medium-sized insurance company isShin-Kong HNA life, and the small-sized insurance company is Sino-French lifeinsurance company. We can regulate the market competitive behaviors by establishingthe fully open and competitive market environment, designing the life insuranceproducts based on customers’ demand and building the professional customer serviceteam.Thirdly, this paper studies the efficiency of market openness in life insuranceindustry. This paper studies the efficiency of market openness from the followingaspects: the empirical analysis of the components of open market rules in lifeinsurance industry, the openness and layout of the market, the efficiency of theopening market, and the impact of open market rules on efficiency. The open marketrules include entry and exit rules, competition rules and trading rules in life insurancemarket. This paper focuses on the openness and layout of the market in competitionrules and describes the openness of market in life insurance industry from three stages.According to the division of different regions，this paper uses the index of premiumincome to analyze the market layout in these different regions, and make researcheson a series of problems, such as the depth and density of insurance, the distribution ofcompanies, the growth of premium, the elasticity of premium income, the conversionof potential security source and the structure of product. The efficiency of marketopenness in Chinese funded life insurance companies is relatively high, but theefficiency of market openness in foreign life insurance companies is lower than theformer and shows a fluctuated increasing trend. The market openness and layout playan important role in the efficiency of market opening de gree in life insurance market.Through making influences on the number of life insurance companies, the laborinputs, premium income and the increased assets, the life insurance market isconducive to improving the efficiency of market opening degree.Fourthly, this paper studies the efficiency of market scale in life insuranceindustry. Based on three stages DEA model, this paper analyzes the evolve tendency of technical efficiency, pure technical efficiency and scale efficiency in30lifeinsurance companies from2002-2011in our country. The second stage makes use ofSFA model to adjust the efficiency, and finally we can conclude the efficiency ofoperating in life insurance companies, which get rid of the environment variables andthe stochastic disturbance. The regression analysis of SFA finds that the market share,the founding time and the branch number have some effect on the companies’efficiency. The adjusted results show that due to the sale efficiency decreases, thetechnical efficiency declines in most years. The adjusted pure technical efficiency ishigher than the unadjusted pure technical efficiency. The research found out thatenvironmental elements have a significant impact on the company operatingefficiency, the small scale and the low management ability are the major reasons forimpeding the improvement of technical efficiency. Therefore, in the future, lifeinsurance companies must change the management idea, change the single means ofcompetition, ensure the underwriting quality, improve the core competitiveness.These companies should also focus on the management of basic services, improve thescale efficiency and overall competitiveness in the life insurance industry.Fifthly, this paper makes the DEA analysis of effectiveness of operati ngperformance in life insurance industry. Market performance reflects the efficiency ofthe market operation and the results of the resource allocation. The study finds thatlife insurance companies have the low margins, the low profitability, the highsurrender rate, the low rate of payment and the insufficient solvency. These factorsmentioned above influence the stable development of life insurance companies. Basedon the input oriented model in the data envelopment analysis (DEA), we conduct theempirical analysis of the effectiveness of the management performance in30lifeinsurance companies from2002-2011in our country. This paper concludes that thereis a positive correlation between the DEA relative efficiency of managementperformance and the company scale in Chinese funded life insurance companies, theDEA efficiency of management performance in Sino-foreign joint venture or foreignlife insurance companies is lower than the efficiency of management performance inChinese funded life insurance companies, and there is a strong positive correlationamong Chinese life insurance companies’ management performance, the developmentof national economy and macroeconomic policies. Through the analysis of thedomestic and foreign life insurance companies’ management performance, this paperfinds that there is a big gap among premium income, assets and profits in life insurance industry in our country, the density and depth of insurance is still low, therate of assets’ profit and the rate of premiums’ profit are in the middle position.Sixthly, this paper studies the market structure, market efficiency andperformance in life insurance industry. In order to understand the relationshipsbetween the market structure, market efficiency and performance in life i nsuranceindustry, we conduct the empirical analysis by using the Chinese life insuranceindustry data from2002-2011. At present, the market concentration degree in lifeinsurance industry is extremely high, with the implementation of the open-doorpolicies in life insurance industry, this high concentration degree is graduallydecreasing. However, oligopoly can not be broken in a short time. The research foundthat the traditional hypothesis of SCP is valid in our countries’ life insurance market,the life insurance company with the higher market concentration degree can obtain thehigher profits, the hypothesis of RMP are invalid, and the company with the largemarket share can not obtain excess profit. From an efficiency point of view, thehypothesis of ESC is invalid, life insurance companies with the higher level oftechnology and management fail to achieve higher profits, and the hypothesis of ESSis valid, the life insurance companies with the higher scale efficiency can achievehigher profits. The life insurance companies in our country mainly depend on the highmarket concentration degree to obtain the extra dividends, and it probably lead tocollude among different companies. Therefore, life insurance companies must payattention to improve the ability of obtaining high performance from the two aspects ofmarket structure and business efficiency.The market structure in life insurance industry is in the process of thetransformation from the monopoly market structure to the oligopoly market structure.We must construct a set of effective rules and regulations to optimize the marketstructure and improve the market competition environment. In order to solve theproblems in life insurance industry, we should optimize the market competition normsand market structure, improve business model and business efficiency, and ultimatelyenhance the life insurance companies’ market performance in our country. In order tobuild the market competition norms, we should constantly regulate the marketcompetition behavior, speed up the construction of the credit system, and improve themarket supervision mechanism. In order to optimize the market structure, we shouldincrease the number of market competitors, introduce competition mechanism,optimize the market structure and improve market exit mechanism. In order to changethe operating mode, we should change operation philosophy, pay attention to the business efficiency and the quality of service, innovate the life insurance products toenhance the core competitiveness, enhance the equity earnings, promote theconstruction of business process and information technology in life insurancecompanies. In order to improve the operating efficiency, we should pay attention topromote the management level, enhance the companies’ scale efficiency, and giveconsideration to both the business development and business efficiency in particular.