An Empirical Study On The Microscopic Financing Function Of China's Insurance Industry

The understanding of the nature and function of insurance has always been the core issue of insurance theory and insurance development.In general,the insurance function reflects the nature of insurance and is an objective requirement for the nature of insurance.A clear understanding of the nature and function of insurance is an important prerequisite for accurately positioning insurance,and it is the core theory for formulating insurance industry development policies,promoting the development of the insurance industry and even economic development.Domestic understanding of insurance functions has been continuously deepening and evolving.In 2006,the State Council promulgated the “Several Opinions of the State Council on the Reform and Development of the Insurance Industry” clearly stated that insurance has three functions: economic compensation,financing and social management.Economic compensation function is the essence and core of insurance.With the development of economy,based on the function of economic compensation,the functions of financing and social management of the insurance industry are derived.The insurance industry obtains and diverts part of the social savings through the underwriting business,and then uses the accumulated insurance funds through investment.This conversion mechanism from savings to investment fully embodies the function of the insurance industry as a financing mechanism for financial institutions.With the continuous deepening of China's insurance industry and the expansion of its service scope,its functions have been increasingly perfected.The general sense of the insurance industry's financing function refers to the function of the insurance company as an important institutional investor in the capital market.While this is a macroscopic concept ignoring the function that insurance industry plays in the microscopic aspect of the whole economy.However,with the continuous improvement of insurance functions,its adjustment of the capital supply side and the demand side of capital is becoming more and more obvious in the process of capital flow of the whole financial system.How the China's insurance industry functions in the process of finance.What role does it play in regulating the resident part of the capital supply side and the corporate sector of the capital demand side? The above is the research background of this article.Based on theoretical analysis,transmission mechanism analysis,and empirical test,the paper proceeds progressively and studies the financing function of China's insurance industry.In the part of theoretical analysis,first of all,the definition of financing function of China's insurance industry is derived based on the financial function theory.In the process of economic operation,financing refers to the use of various financial instruments to adjust fund surpluses.In general,the household sector is the surplus sector of funds,while the corporate sector is the shortage sector of funds.In addition to its role in absorbing capital and disbursing funds,China's insurance industry's financing function is reflected on how it promotes funds diverts from resident sector to corporate sector through direct channels in the process of capital flow in the entire economic operating system.Secondly,combing preventive saving theory and laying the theoretical foundation for transmission mechanism of how the insurance industry promotes the household deposit diversion;similarly,combing the credit ration theory and laying the theoretical foundation for the transmission mechanism of how insurance industry promotes corporate finance.The part of transmission mechanism contains two aspects: how the insurance industry promotes household deposit diversion and how the insurance industry promotes corporate financing.First,it analyzes the insurance industry's transmission mechanism to promote deposit diversion.The household saving diversion means that the addition of new saving of residents continuously flows into banks as while as it also flows to other credit forms and instruments such as stocks,bonds,etc.This is in line with China's former unified bank credit and is the specific category of financial reform.Households can reduce the uncertainty of their future income and expenses by purchasing insurance,thereby reducing the precautionary saving motives and increasing the probability and share of residents' allocation of savings to stocks,bonds,futures and other risky financial assets,thereby providing more funds through direct financing channels,thus achieving the goal of diversifying the financing channels.Second,analyzing the role of the insurance industry in promoting corporate finance.After an enterprise purchases insurance,the corporate's liquidity risk,default probability,bank-to-business supervision costs and the stability of the collateral value after the loss are reduced so that the credit rating of the enterprise is raised and the expected return on bank loans is also increased.Based on the theory of credit ration,this paper verifies that insurance can help corporate to obtain more credit funds through guaranteeing the stability of collateral value.The empirical test part contains two aspects: one aspect is empirical test on the effect of China's insurance industry on household deposit diversion and the other aspect is the empirical test on the effect of China's insurance industry on corporate financing.First of all,it examines the financing function of the insurance industry from the perspective of the insurance industry promoting deposit diversion.Using the data from the China Family Income Survey conducted by the China Institute of Income Distribution in 2013,based on the control of other household heterogeneity variables,Probit model and Tobit model are used to test the effect of commercial medical insurance and commercial pension insurance on the decision of the household deposit diversion.According to the analysis result,it was found that the probability and share of the deposit diversion of households after the purchase of insurance increased significantly.This proves that insurance can effectively promote the flow of household savings from the form of bank savings deposits to other credit instruments and achieve the promotion of funds through different channels.Secondly,from the perspective of the insurance industry promoting corporate financing,the insurance industry's financing function is tested.Using the financial data of listed companies,based on the control of other company characteristics and corporate governance variables,a panel data model of insurance expenditures,debt costs and debt capacity was constructed.The empirical results shows that the higher the level of insurance coverage of corporate tangible assets is,the more debt they achieve and the higher the company's premium expenditure level and the greater its cost of debt,which confirms the role of insurance in promoting corporate finance.In order to make the empirical results more general,this paper also adopts export credit insurance data to test the robustness of the functions of insurance promotion of corporate finance.Based on the control of other macroeconomic variables,it constructs the time-series model of financing size and export credit insurance coverage,we find that there is a long-term and stable co-integration relationship between export credit insurance and export financing scale,and the higher the underwriting premium,the larger the financing scale,reaffirming from the perspective of different samples that the insurance industry in China can promote corporate finance.Compared with the existing research,the innovations of this paper are reflected in:(1)The research ideas of the financial service function of insurance industry have been expanded.The existing research on the financing function of the insurance industry mainly focuses on the discussion of the use of insurance funds and it is a macroscopic concept.This paper examines the financing function of the insurance industry from the microscopic perspectives of the insurance industry promoting the diversification of funds supply channels(deposit diversion)and promote allocation to corporate.(2)Based on the research of the effect of insurance on the decisions of allocation of household bank savings and non-bank savings,researching the effect of the insurance industry on the diversification of funding channels.(3)Using the latest data,taking the listed companies in China as a sample,to study the role of insurance industry plays in promoting corporate finance,and then taking exporting companies as another sample,we conducted a robust inspection on the insurance promotion of corporate finance.