Research On The Asymmetric Information Of Insurance Contract

Insurance contracts are highly dependent upon information. It's an important guarantee to achieve the fair trade and improve the market efficiency that the main parties involved in the market carry out an effective and sufficient exchange of information. In order to achieve both genuine freedom and justice of contract, the issue of asymmetric information should be solved in the process of insurance transaction to ensure both parties of insurance transaction are under an equal position to deal with a contract. In the early stage of development of insurance law, there was an issue of incompletion on the transferred information between the insurers and the insured: the amount of information about the subject of insurance that the insure holders knew was greater than those that the insurers knew. e.g., the insurers could be in disadvantageous position during insurance transaction if the insure holders held back some relevant information from the insurers. With rapid development of technology, the asymmetric information on the insurance market has been changing gradually, the insurers are being equipped with a great sum of capitals and a team of professional and technical employees figuring out risk rate and customizing insurance contract so as to enable the insurers to achieve more information. At meantime, it's common to see that the insurers refuse to make a payment to the insurers by misusing insure holders'insufficient duty of disclosure, which put the insure holders in a distinct disadvantageous position during insurance transaction.Existence of phenomenon of asymmetric information on insurance market is absolute and cannot be eliminated, which lies with the character of insurance policy.Hence, what the insurance law needs to do is not about how to eliminate the phenomenon of asymmetric information, is about how to reduce the negative impact on insurance market caused by asymmetric information. The dissertation is aimed to solve the problem of the asymmetric information in the insurance contract. By analyzing the situation, hazard and cause of the asymmetric information in the insurance contract a series of mandatory statutory obligations can be regulated to achieve the disclosure of information as far as possible in order to achieve lower costs of transaction and promote the exact purpose of the transaction and maintain the order of transaction so as to protect the interests of both parties further. The dissertation focusing on the asymmetric information in the insurance contract consists of six chapters in addition to Introduction and Conclusion:Chapter I: The theory of the asymmetric information in the insurance contract. From the views of information economist, the original causes of all economic issues can be found from the asymmetric information. This chapter started with the theory of the asymmetric information in economics and then detailedly analyzed several typical phenomena of the asymmetric information on financial mark and concluded the connotation of the theory of the asymmetric information and discussed the value of law that the symmetric information can help achieve fairness and efficiency in law.Chapter II, the relationship between the asymmetric information in the insurance contract and the insurance transaction. First of all, insurance is a kind of invisible product. Therefore, it is indispensable for parties of the insurance contract to fulfill the obligation of the mandatory information disclosure and to inform insurers of information available, which seems contradictory to the principle of freedom of contract in contract law. Nevertheless, in fact such a compulsory information disclosure plays a main role to balance the relationship of rights and obligations between the parties and achieve the freedom of contract in a better way. Secondly, the insurance law has experienced historical reform and development for many years and has gradually improved the content of the principle of utmost good faith in which a series of rules have made a major contribution to limiting the misuse of freedom of contract, to balancing the interests between the parties of the insurance contract and to fully exchanging the transaction information. In order to protect interests of the insured further, the insurance law is tending toward strengthening the obligation of instruction and weakening the obligation of information.Chapter III, the impact of the asymmetric information on the insurance law. First, the asymmetric information in the insurance transaction is in the form of the asymmetric information of the subject of insurance, the knowledge insurance, the technology of insurance, the supervision of insurance. Second, an important impact of the asymmetric information upon the insurance market: Insurance holders cover up the status of risk and the real situation of the subject of insurance before making an insurance contract with insurers, which will lead to an adverse selection of insurance market; Insurance companies are unable to control the insured's personal behavior before and after making an insurance contract. If the insurance risk occurs due to that the insured intentionally causes the fault leading to that the insurance companies would take on the higher pay rate than normal probability, which is so called"moral hazard"which would bring more serious consequences of insurance fraud.Chapter IV, the multi-dimensional analysis on the asymmetric information in the insurance contract. The asymmetric information in the insurance contract in this chapter was analyzed in a multi-perspective way. First of all, the phenomenon of the asymmetric information in the insurance contract has a profound cause that the development of insurance system and risk transfer system of insurance contract information function is the cause of the asymmetric information in the insurance contract. Secondly, owing to the complexity of the insurance market, with the main profit-driven insurance, access to insurance information of the transaction costs required for insurance contracts is to consider both parties an important factor in the insurance market, resulting in opportunistic behavior which will be the asymmetric information arising from the insurance contracts. Finally, the insurance contract is a typical form contract, the contract itself, the characteristics of the format enables insurance contracts enter into at the beginning from the asymmetric information on the drawbacks of having to adopt the format of contracts to reduce transaction costs, and the settlement of the contract brought by the format of information asymmetry problems form contract to serve the real contract of insurance is the ultimate goal of both parties.Chapter V, the legal regulation of the asymmetric information in the insurance contract. In order to balance the relationship of the rights and obligations between two parties and realize the reciprocity of interests, the legal regulations of the asymmetric information in the insurance contract were divided into two parts: the regulation of legislation and the regulation of law of supervision. On the one hand, under the legislation the relevant regulation of insurance needs to be regulated to require the main parties on the insurance markets to fulfill their commitments in accordance with the principle of utmost good faith, to reach genuine freedom of contract in the insurance transaction by regulating the obligation to inform the insured, the obligation of notification, the obligation of the insurer's instruction and the obligation of confidentiality,etc.; On the other hand, the government conducts an overall guidance and management towards national insurance industry through the specialized agencies of the insurance supervision and management. The presence of the government integrating the information contributes to the reduction of costs for the insured on collecting the information and to provision of convenience and possibility on the insured's decision-making. In addition, the insurance industry association, as an effective complement to government regulation, also plays an increasingly important role on the law regulation of asymmetric information in the insurance contract.Chapter VI, the institutional arrangements to resolve the asymmetric information. First of all, China's current "Insurance Law" plays an important role in regulating insurance activities and in protecting the interests of all parties. However, with the rapid development of the insurance industry, the insurance industry has had a great change on its internal structure and external environment. The revision of the "Insurance Law" in 2009 has been added to the "no defense" which is a major spotlight in the revision, which is reflecting the "Insurance Act" to strengthen the protection of policyholders, the insured person's legislative trends. Secondly, as far as China's insurance law is concerned, in order to improve the whole legislation system, on the one hand, the guarantee policy should be introduced at an appropriate time. One the other hand, in order to avoid the misuse of guarantee policy which can bring the insured or the insurers the necessary trouble, the inspection on guarantee policy must be carried out in a strict way. Finally, the timely introduction of estoppels and abstention system should be performed in the aim of urging the insurer to perform the contract in good faith, but also to strengthen the management of insurance agents.