Study On Structure, Conduct And Performance Of Chinese Insurance Market

Chinese insurance industry has been keeping a forceful increasing tendency over the past 20 years since reform and opening to the outside world. Its premium growth rate is close to 30%, and the annual growth rate of its total assets also reaches 35% in recent five years. As a new developing market, China's quick rise has aroused great attention in the world insurance. But the competition of Chinese insurance market (CIM) is very deficient, with low performance as well as non-stopped out-of-order and malignant competition. All these problems have weakened Chinese insurance competitiveness seriously. The essential cause that brings these questions is the oligopoly market structure. Taking the canonical analysis on the insurance market structure as the starting point and based on the SCP analytical framework of industrial organization theory, this paper has carried through the theoretical and empirical analysis on CIM structure, behavior and performance, explored the deep cause that led to the dynamic variance of market structure, the nonstandard market behavior and the low performance. Finally, the paper brings forward some feasible proposals with the purpose of providing theoretical basis and reference for optimizing CIM structure, standardizing its behavior and improving its performance.According to industrial organization theory, it is undoubtedly important that market structure should be taken as the logic starting point of the circulation since it determines market behavior and market performance, but there is a two-way interactive relationship between market structure, behavior and performance. The nonstandard market behavior and the low performance caused by the market competition insufficiency, on the contrary, determines the oligopoly market structure. Therefore in China not only the oligopoly market structure can't disappear abruptly in a short time but also will continue for a long period along with the multinational merge of global insurance and continuous emergence of financial magnate. Although the oligopoly market structure has double effect and some certain adaptability with the present situation of China, CIM structure evolves violently now, and its long period objected model ought to be monopolistic competition in which large and small companies live together, and competition coexists with cooperation. However, this variance has no way to come true smoothly only by depending on spontaneous market mechanism, effective organization policies must be introduced in this process. And furthermore, the policies of Chinese insurance industrial organization should be adjusted correspondingly to match this variance so as to get equilibrium between policies and variance. Finally, the paper puts forward the adjustment direction of our insurance industrial organization policies. Overall speaking, studying on the inherent logical relationship between CIM structure, behavior and performance intensively can not only provide the reference for insurance companies to make their policy strategy but also offer the basis for our government to work out insurance policies and grasp its trend.The paper uses canonical-empirical and qualitative-quantitative analysis methods, takes econometrics and DEA as analytic tools, to verify the relationship among the main bodies of our directed insurance market. From a new point of view, it combines researches on industrial organization theory and insurance theory together, tries to complete and enrich them on theory, and expects to establish the theoretical analysis frame of CIM development and the analytic way to forecast and analyze CIM tendency.The paper attempts to innovate in the following aspects: Firstly, although the oligopoly market structure has adaptability with CIM, it has double effect. How to promote its advantage and restrain its disadvantage is very important to Chinese insurance development. Comparing with the existing research results which pay more attention to its defect, this innovation has some novelty at least. Secondly, combined with our new bankruptcy law, the author for the first time points out the institutional defects in the exiting mechanism of our insurance market, then gives several suggestions about how to perfect it, and brings forward the feasible scheme about how to build the insurance guarantee fund system. Thirdly, under the condition of open economy, the author deems the choice of CIM objected model should be made based on Chinese insurance reality, besides, puts forward the dominant thought which should be decided by layered and dynamic angle and expounds its reasons. At present, there are two kinds entirely different viewpoints in academia about Chinese insurance market objected model, which is either oligopoly or monopolistic competition. Compared with the above two points of view, the author's viewpoint has both reality and innovation.Based on the correlative theoretical study by the predecessors, at first, the introduction gives the studying boundary which only includes the directed insurance market, excludes the reinsurance and the intermediary agent market. There are 6 chapters in this paper, which can be divided into 4 parts according to the content.The first part includes chapter one and chapter two, which mainly analyses CIM structure by the way of canonical-empirical analysis method. Observing the CIM dynamic variance, the author in chapter one builds the theoretical analysis frameworks of the insurance market structure by constructing a function expression in which various influential factors of market structure are taken as independent variable, such as concentration ratio, difference in insurance product and service, entry and exit barriers, economy of scale and scope, market opening degree, technological innovation, system restriction and so on, and market structure as dependent variable. And then the author analyses the impact of these factors one by one. The primary conclusion of this chapter is that CIM structure belongs to the typical oligopoly at present. Based on analyzing several relative index about market structure, such as concentration ratio, HHI, entry and exit barriers, and difference in insurance product and service, chapter two validates the conclusion that chapter one has drawn and has expounded its reasons.The second part, chapter three, mainly focuses on several market behaviors of CIM. In the process of CIM development, there are some bad behaviors, such as price war, product and service homogeneity, insufficient innovation, etc. Judging from deep-seated cause, these phenomena are attributable to insufficient effective competition, but the most important cause of insufficient effective competition lies in oligopoly market structure. So, market structure has produced serious effect on market behavior, conversely, the nonstandard market behavior leads to the market structure unreasonable further. How to standardize market behavior? This part has proposed some countermeasures which include loosening the premium controlling and promoting its market-oriented reformation, implementing the difference strategy in product and service and breaking the bottleneck of insurance innovation, but the most important measure lies in optimizing insurance market structure and adjusting insurance industrial policies.The third part, chapter four, carries out empirical analysis on CIM performance under oligopoly market structure. Starting from financial factors that measure the market performance, this part investigates the earning capacity of CIM and finds that the profitability of Chinese insurance industry is very low. Besides, it estimates the performance of the main property and life insurance companies by using DEA as analytic tool and draws a conclusion: relative DEA validity has a positive correlation with their scale, existing time and market share. However, after having chosen five biggest insurance companies as samples and carried out regression analysis, the author finds only the insurance market of People's Insurance Company of China (PICC) has a positive correlation with its performance. This accords with Bain's "structure-achievement" theory seemingly, and conforms to the result of DEA. But we should have a sober cognition to the result authenticity. Because the formation of PICC's high market share is due to strong historical background and political reasons instead of the spontaneous result of market mechanism. The fact that its market concentration ratio can't pass the empirical test has also explained this problem. The gigantic scale of PICC doesn't come from the periodic accumulation. That is to say, the most important factor that the oligopoly market structure has come into being is political reason instead of free market competition. Comparing with the large international insurance groups, the scale economic efficiency of PICC is very low. Therefore, the essential measures of improving market performance lie in optimizing market structure and promoting market competition.The fourth part includes chapter five and chapter six. To begin with, this part sets forth the objected model of CIM under the opening situation, then points out that optimizing market structure and adjusting organization policies are the preconditions to realize this objected model. And meanwhile, both the theoretical and empirical analysis have been carried out to show that they are also essential measures to standardizing CIM behavior and improving CIM performance. However, we should choose the objected model according to Chinese insurance reality, and decide the model from the layered and dynamic angle under the opening situation. That means our short-term objected model ought to be the structure of "network-cooperative oligopoly" that oligopoly companies play dominant role and all kinds companies existing, and our long period objected model ought to be monopolistic competition in which large and small companies live together, and competition coexists with cooperation. In the process of the short-term objected model's conversion to the long-term one, reasonable and effective organization policies must be required. Certainly, the insurance market organization policies can't be unchangeable or rigid as the important countermeasures that make up the market defect and overcome its failure. They should be adjusted unceasingly according to the dynamic variance of insurance industrial organization. The policies may include: optimizing market structure, establishing effective entry-exit mechanism, deepening the reform of insurance property system, perfecting company government structure further, realizing insurance scale economy with the principle of group-specialization, encouraging both small and medium-sized insurance companies to accomplish specialization, promoting Chinese insurance coordinated development in term of the area difference, adjusting the supervision thought, changing the supervision emphases, and building the multiple layered supervision system, etc.