Research On Life Insurance Contract Duration

Contract theory is a hot research area. New-institutional Economics holds that every transaction is contract. Contract theory observes every transaction relation through "contract mirror". This thesis choose insurance contract as the research target, and try to bring insurance into framework of contract theory. Insurance contract is a representative contract relationship. It envelope many core component of contract theory, such as asymmetric information theory, incomplete contract theory, incentive mechanism and so on. Almost every transaction is based on the insurance contract.Now insurance industry in China is an undeveloped industry. In this sense, the research on it has a very important meaning. In the initial stage, there are many problems in the insurance markets. These problems block the development of insurance industry to a great extent. For example, surrender activity always happens, which results in drain on cashes; break of utilized the fund plan; making capital match debt difficult. So the research on the problems will give much help to the development of insurance industry.This research considers one dimension of insurance contract, contract duration. Just as its name implies, contract duration is how long a contract holding. The research considers contract duration because it has a direct bearing on the surrender activity which is widespread in insurance market. Contract duration presuppose the existence of surrender activity. The factors that influence the duration of insurance contract includes, characteristics of the insured, characteristics of insurance, change of competition environment and eventualities. Firstly, the characteristics of the insured include sex, age, occupation, income and so on. Secondly, the characteristics of insurance include price, supplementary charge and whether the insurer fulfill the explain obligations. Thirdly, competition on the market and eventualities will affect contract duration.These factors from the perspective should be of the other classification. That is, one, some of the determination of factors t is included in the insurance contract, some characters are not possible to include in the contract. With regard to name, age, occupation, income, and other information of the insured are available to insurers. Even if the insured can conceal the truth, "third party" should confirm it. The price of insurance, surcharges principles can also be confirmed. The information in the insurance information between the two sides is symmetrical. And some factors, such as, the insurer's products and services, the habits and customs of the insured, are asymmetric information. For the former, insurers hold more information; for the later, the insured who holds more information. In addition, the life insurance market competitions, as well as the occurrence of unexpected events are uncertainties. In the course of transactions, the information about the up two is not available. The sum of these factors will to some extent affect the insurance and the duration of the contract.First of all, this article has normative research on the impact of these factors on the insurance contract duration. In the analysis of the role of risk information, insurance products and services quality, the role of income, this thesis makes three mathematical models of the contract. Specification through analysis of the insured risk, the higher the level, their insurance contracts last longer. On the different characteristics of the insured, the insurance option is different. The quality of insurance products and services, to a certain extent, will affect the insured choice. Emergencies will also increase or decrease the awareness of insurance necessity, continue to affect the willingness of the insured. In addition, the intensity of competition in the market whether or not have an impact on the duration of the contract need to be further tested.From the regression analysis on the data from a life insurance company, the thesis obtained some very valuable results. First of all, the insurance demands of men art less than women; the high-income insured ,in general ,buy a relatively short time insurance; with age increasing, the demands for insurance are rising; the higher the occupational risk level ,the longer term option to buy insurance. It is worth mentioning: as a measure of the health status of the insured, the "health surcharge" has no significant results. Thinking about this the whole story should be due to the asymmetric health information, so that the fee increase will not have much demand for insurance. Second, the insurance fee rates has a significant negative impact on the duration of the contract , the merits and demerits of services will affected the insured's choice. This proves the normative analysis. Finally, market competition is not a significant indicator. The possible reason is that despite the fierce competition in the market, the insured have greater demand, but the high costs hinder the transfer of its choice to a new insurer.