Studies Of Investment Innovations In The Insurance Industry

Following the further advance in opening-up the Chinese economy and fine-tuning of the Chinese market economy system, the Chinese insurance industry is facing challenges that have never been seen before. Based on historical experience of the insurance industry in the developed countries, during the deregulation process of the insurance industry, more fierce competition caused by an increase in the number of industry players would lead to a lower profit margin or even loss in underwriting - the main operation of the industry. The survival of the industry is then relying on more effective utilization of insurance funds, which means the viability of a company depends on its investment incomes. When observing the Chinese insurance industry, especially since China's entry of the WTO, researchers may have seen the industry facing a similar situation. Therefore, insurance investment will play a role more important than ever in insurance operation.The Chinese insurance industry has long been suffering from a low overall efficiency in fund utilization. Although reasons for this may well include government policy issues and market readiness, the foremost important reason, however, lies within the insurance companies. Otherwise, there would be no sensible explanation for the large amount of non-performing assets accumulated in the process of operating the insurance funds before 1993. In an open market economy of today, the Chinese insurance industry is facing a more severe challenge: in order to succeed in the future competition, the investment capability of the Chinese insurers will face challenges from not only domestic competitors but also their foreign counterparts, and from not only within the industry but also other finance industries. In the process of competing with these rivals, the Chinese insurance industry must improve its management effectiveness, and more importantly it must discard the traditional mindset; it must adopt a whole new set of beliefs and innovative ideas, rely on the unique features and advantages of the insurance operation, borrow theory and technology from finance 'engineering, and promote innovative research and practice in insurance funds investment. Otherwise, the Chinese insurance industry will not be able to develop or survive in the increasingly competitive environment.Existing research in the area of insurance investment is mainly limited to applying conventional theory, technology and tools, with a fundamental purpose of studying the involvement of insurance funds in the capital market. It lacks in research innovations. In the meantime, research on product innovation in theinsurance industry is largely focused on the micro level of product design, mainly aimed at enriching and improving the functiona.lity of the insurance products. Researchers have yet to study the inter-relations between product operation and capital operation within a product, or within an insurer., that is, how to set up links between risk operation and investment risks, hov to add investment components into the traditional insurance products and promotion channels, and as a result, how to formulate insurance products into comprehensive products with dual functionalities of both risk operation and invest nent An insurance company is then able to utilize its competitive edge in operating its insurance products to integrate its internal resources, to lower its transaction costs, and to formulate its advantage in investment operations.By studying innovations in insurance investment, the insurance industry would not only be able to deal with future competition from investment banks and other industries by cultivating core competence in its insurance investment, but also to exert significant impact on the stability and development of the traditional insurance operations. In the meantime, core competence in insurance investment will promote further diversification of the insurance operation in China and strengthen support for developing and operating investment-linked comprehensive products. This will help to lay a...