A Study On Insurance Security Of China Under Circumstances Of Financial Opening

A Study on Insurance Security of China under Circumstancesof Financial OpeningSecurity has become a highly crucial problem after the opening of China insurance market. How to control the increasing risk has become an important question to insurance industry where risk is centralized. Academia has done little systematic research on insurance regulation issue. Therefore, the research on insurance security became much meaningful and important.IFactors Affect Insurance SecurityThe factors affect China's insurance security are:The contradiction between fast increasing premium and low yield rateThe amount and proportion of non-performing assets is risingProfit rate and stability of solvency decreased by foreign impacts The out-of-date operating mechanism and lack of risk controlling ability of China-invested insurersVirtual risk in regulation because of information asymmetrical between CIRC and insurersRegulation body's lack of macro-management ability The public finance always pays the bill at last, made the risk turns to state risk finallyOn industry policy, market-orientation, internationalization, balance, innovation and dynamic gambling are not concernedHigher tax rate and wider tax basis compared to other domestic financial institutions and overseas insurersBasically no tax benefit to policyholdersThe insurance regulation system is the institutions and division of responsibility and power of insurance regulation. Nowadays, problems of China's insurance regulation are:The responsibility of CIRC is not clear: It is both the administrative body and the regulatory bodyCIRC is a regulator that is adapted much to planned economy than market economy The power of CIRC is over centralized, that makes re-regulation (regulation on regulatory body) much difficultCompared to foreign regulation system, CIRC also has the right of legislationAs to insurance market, a mature market needs mature regulation. The mature regulation system divides legislation, execution, and regulation in three. The deep reason of the insurance market's slow development is lack of the division. China has made some progress on this issue, but is still far from a stable and balanced regulation system. IIRegulation is Fundamental to Realize Insurance SecurityTo realize insurance security, is to make insurance risk controllable. Insurance has its characters of liability, social and compensation. Insurance policy is a promise to insured risks in the future. Apart from capital, the money an insurer invests is all liabilities made by selling policies. Insurance policies are based on special statistic techniques, which can hardly understood by common people. Therefore the information asymmetrical easily appears. Some speculative phenomenon may appear in areas like product design, underwriting, claims and customer service. Currently the agents are not formal employees of insurers, they often misleads the customers during selling. Regulation must be strengthened to protect policyholders' interest.Insurance risks are made by the participants of the market. From the view of an economist, the reasons of virtual risk are mainly three:Information asymmetricalAnti-selectionDisability of controlling the insured objectMass surrender takes place because of market participants' irrational behaviours, conformity to the public, lack foresight to disasters, information ignorance and organizational corruption. Insurance regulation is also limited. Limited by the border of government, a government always has its disabled field, existence of which affects the practical effect of insurance regulation. Therefore, we should estimate the practical effects of insurance regulation. Market inefficiency can be complemented and modified by government. However, governments should not be apotheosized. It can only be imagination that governments can complement and modify all market inefficiency. Actually, in many cases, some problems can be solved by neither market nor government. Not in all fields, marke...