The Reasearch On The Transaction Cost Institutions Of Insurance Industry In China

Insurance industry of China is one of the world insurance markets with the most rapid growth rate. China had been reforming the financial systems during the past 20 years. The nature of that innovation was the evolution of institutions. Although most of economists agreed that the institutions was important,but how it worked on was still a very valuable theoretic region. The purpose of the article was to develop a theoretic framework " Institutional Sturcture-Conduct-Performance" which based on the modern theory of organization,and investgaed the transaction costs institutions of insurance industry in China.The insurants' resource exhausted over the actuarial premiums was defined as the transaction cost,and the games rules based on the payment mechanisms of the transaction cost which effected the trade of policy were defined as the institutions. The institutional structure was the combination and the relationship of the institutions,incl -uding the formal and informal ones. The relationship among sturcture of institutions, Conduct and Performance was discussed after the statement of the hypotheses and the conceptions.The institutional effection on the market was studied,and founded that the institutions worked on the barriers of entry and exit,the scale of the insurers and concentration of markets crucially during the evolution of market structure. Then, the structure of institution how it worked on the effciency of insurers was analysed. The results of the empirical research with cross-section data in 2005 suggested that over 85 percentage of the sample operated with increasing returns of scale,but ones which expanded too quickly and several state-owned insurers with higher markets shares operated with decreasing returns of scale. Almostly all the insurers operated with diseconomies of scope which based on the multiproducts lines. The scale efficiency and the X-efficiency were tested used the pool panel data during 2000-2005.and the difference of institutional effects on the scale efficiency and X-efficiency under the constraints of capability and the reinsurance arrangement:The efficiency of scale and X-efficiency of the joint venture and foreign insurers excelled the efficiency of others,and the institution effect on efficiency existed in the property insurance industry,but the life insurance industry without such effect. Then the relationship between markets structure and performance was examined. The MP hypothesis was supported in the property industry but the ES hypothesis in the life insurance industry. Whereas the institutions with decisive influence on the market structure,and the article suggested that MP and ES maybe reflected the relationship between structure of institution and performance. The insurers with higher X-efficiency,the probability engaged in competiton of premiums and commisions is higher too,but the welfare of two kinds of price competition was different under different institutional structures. The evolution of transaction costs institutions was determined by the designation of policies. Finally,some suggestion about the reform of transaction cost institutions were advanced.