Research On Governance Structure Of Chinese Life Insurance Companies With Double Objectives

The life insurance industry,as a social stabilizer and economic booster,provides people with security in terms of personal safety,disease,old-age care,and medical care.It has great external effects on dispersing social risks,making up for lack of social security,and enhancing social stability.Once the life insurance industry has problems with operation or capital,it will pose a great threat to the interests of policyholders,the entire social security system,and even the stability of the capital market and society.It is precisely because the development of the life insurance industry itself has both positive and negative external influences on the society that it determines that the operation of life insurance companies should be focused on the double objectives of corporate governance,which is,while pursuing the maximization of the interests of the company's shareholders,it is of great importance to pay attention to the safety of the use of life insurance funds and the stability of the company's continuing operations.The special nature of the double objectives of life insurance companies also determines that there is a relatively big difference in corporate governance structure between companies with double objectives and those with single objective,which eventually will have significant impact on behaviors of life insurers with regards to making financial and operational decisions.The Shareholders Meeting,the Board of Directors,the Board of Supervisors and the executive team of each life insurance company should always take the company's performance,shareholders' interests,and the interests of policyholders and social stability as the strategic goals and guidelines for long-term,stable development of the company.Through the development process and practice of Chinese insurance industry,the insurance market had been developing in a steady,continuous,and healthy manner since the reform and opening up,and the life insurance sector presented itself to all sectors of society an image of stable operation and low-key investment,and effectively promoted the stability of society and capital markets.However,since 2014,from the arbitrage of insurance funds to the recent incidents in which Anbang Group was directly taken over by the China Insurance Regulatory Commission,people started to question the management and governance issues of life insurance companies.Individual life insurers' frequent placards and high-profile investment chaos have even been dismissed as barbarians' goblin behavior.Life insurance companies that rely on premium income as the main source of funds should ensure that they have sufficient solvency,safeguard the personal security and other interests of policyholders.However,the aggressive investment in the capital market such as aggressive arbitrage in public companies and the “quick-entry and quick-out” M&A activities has led to the use of short-term,high-cost liabilities on a large scale for long-term,high-risk equity investments,casting great risks on the life insurance companies' own continuing operations,the capital markets,and the economy in general.Through the analysis of the material risk incidents in the history of American and Japanese insurance industry,the review of the two unit link insurance business storms in China,and the comparison of the two typical cases of the highly controversial Baoneng and Wanke equity dispute and Anbang incident,it reveals a series of issues in the governance and operation of a number of life insurers including: some life insurance companies did not properly handle and balance the interests of individuals and corporates;the external risks,and the safety of funds,and the ownership and governance structure have become so skewed that individual shareholders have used the life insurer as a financing platform;and some insurance companies have pursued excessive investment returns and profits.The essential problem behind this is the balance between the corporate governance structure and the double corporate governance objectives.Therefore,the study of the corporate governance structure and decision-making behavior of life insurance companies under double objectives carries significant meaning in improving the management and governance structure of life insurance companies,promoting healthy development of life insurers,and optimizing the external regulatory environment.Based on the above background,this dissertation takes some representative Chinese life insurance companies as the research objects.Through the analysis of corporate governance data and financial data,the dissertation tries to find out the reasons and appearance of the duality of the establishment of the objectives of corporate governance of the life insurance companies and the evaluation of the companies' operating status.The dissertation also tries to find out the difference in the choice of corporate governance structure and corporate governance objectives between life insurance companies with different ownership.Based on the special features of life insurance companies' operations and the available unbiased data,this dissertation constructs a life insurance company governance evaluation system that is completely based on objective data indicators,and conducts a comprehensive evaluation of 36 Chinese life insurance companies.These companies are then further divided into four types according to the assessment scores so as to provide a certain basis for different types of life insurance to improve corporate governance and for related regulatory departments to implement classification regulation.On the analysis of governance structure,through theoretical review,case analyses,and quantitative analyses,the impact of governance structure of life insurance companies on corporate financial and operating decisions is analyzed,and the differences of the impact of corporate governance structures under different ownership systems are analyzed.Based on the above analyses,the dissertation discusses how life insurance companies should establish a reasonable corporate governance structure and help companies make decisions when they face the double objectives.This dissertation is divided into six chapters.Chapter One is the introduction,introducing the topic selection background and the research framework.The topic selection starts with the externality of the life insurance industry,and analyzes the relationship between the governance objectives of the life insurance company and the special features of the corporate governance structure and the corporate governance decision.It is of theoretical and practical significance to improve company operations and governance.This chapter also clearly defines the subjects of the study,aka,Chinese life insurance companies,and analyzes the reasons for the study of Chinese life insurance companies,and the basic concepts such as the double objectives of corporate governance and the governance structure of life insurance companies are explained.Finally,the research content,research methods and the framework of this dissertation are introduced.Chapter Two is a comprehensive review and combing of life insurance company governance theories.According to the basic framework of corporate governance,life insurance company governance structure,and the logical framework of life insurance company governance structure evaluation,relevant research literature is reviewed.And based on relevant research literature on the externalities and double objectives of life insurance companies,this chapter focuses on why life insurance companies have double objectives,and why the dual nature of life insurance company governance objectives is an indispensable part of life insurance company governance research.Based on the theoretical review,Chapter Three has sorted and discussed major risk events in the history of insurance at home and abroad.The question "Why does the insurance company have a large number of risk events?" was proposed and answered.It is found that its essence of this problem is a lack of governance.From the perspective of the governance structure of life insurance companies,this chapter compares the similarities and differences between internal and external governance under single objective and double objectives,and finds out the special features of governance structure of life insurance companies.Based on this,it should be considered how to avoid possible problems and establish a more standardized life insurance company governance structure.Therefore,Chapter Four describes how to construct an objective life insurance company governance evaluation system.By drawing on the general corporate governance evaluation systems and domestic and international life insurance company governance evaluation systems,and combining the special features of life insurance companies' objectives and structure,this dissertation establishes a relatively reasonable and standard life insurance company governance evaluation system.Based on the principles of operability,quantification,systemization and importance,the evaluation system selects seven categories of indicators:shareholder governance evaluation,board of directors governance evaluation,board of supervisors evaluation,management evaluation,risk management evaluation,information disclosure,and stability evaluation,and gives appropriate weight according to the degree of their influence.In the empirical research,governance data and financial data from 36 Chinese life insurance companies were collected.According to the evaluation system,all sample companies were objectively scored,and the characteristics and differences of the four types of companies in corporate governance were summarized and compared in detail.The analysis results verify the relative rationality of the life insurance company's governance evaluation system.Chapter Five is the analysis of life insurance company behavioral decisions based on governance structure.This chapter details the path that the life insurance company's governance structure has on the company's behavioral decisions.And using empirical analysis methods,from the perspective of finance and operational compliance,the impact of the governance structure of a life insurance company on the decision-making is analyzed.At the same time,it classifies the scores and the number of placards,analyzes the differences in the different corporate governance structures,and the impact on corporate behavioral decisionsChapter Six is the conclusion and suggestion of this dissertation.Based on the above analyses of the governance of Chinese life insurance companies,it summarizes the reasons behind the special features of governance objectives and structures of life insurance companies.Life insurance companies of different nature reflect different corporate governance structure characteristics and issues.There is a relationship of mutual influence and restriction between corporate governance structure and corporate governance objectives.Based on the observation,this chapter proposes six suggestions including the implementation of classification regulation of life insurance companies to effectively solve various corporate governance issues;making large-scale life insurance companies as leaders in improving corporate governance mechanisms;promoting the concept of value development to return to the nature of life insurance;integrating the financial regulatory mechanisms to strengthen the regulation of life insurance funds;further regulating the investment structure of insurance funds to serve the real economy;and improving the risk management and control system to establish an effective internal and external supervisory system.The breakthrough of this dissertation is mainly in the following three aspects.First,by drawing on the general corporate governance evaluation system and the domestic and international life insurance company governance evaluation systems,and combining the special features of the objectives and structures of life insurance companies,this dissertation establishes a relatively reasonable and standard system for life insurance company governance evaluation.Based on the principles of operability,quantification,systemization and importance,the evaluation system selects seven categories of indicators: shareholder governance evaluation,board of directors governance evaluation,board of supervisors evaluation,management evaluation,risk management evaluation,information disclosure and stability evaluation,with appropriate weights given according to the degree of influence.The second is using the method of empirical analysis to analyze the impact of life insurance company governance structure on corporate decision-making from the perspectives of finance and operational compliance.At the same time,the scores and the number of placards are classified,and the differences between the governance structures of companies with different ownership and the impact on corporate behavior decisions are analyzed.The third is sorting out and discussing major risk events in the history of insurance at home and abroad.The question “Why insurance companies will have a large number of risk events” is raised and answered,and it is found that the essence is the lack of governance.Furthermore,the similarities and differences of internal and external governance between companies with the single objective and the double objectives are compared from the perspective of the life insurance company's governance structure,and the special feature of the life insurance company's governance structure is found.There are still parts to be improved in this dissertation.First of all,the life insurance company governance evaluation system constructed in this research needs further improvement,and related indicators and weights need to be tested and optimized through more extensive practice.Secondly,life insurance industry in China is in the process of rapid development.Compared with mature markets,new situations and new problems are constantly emerging.The focus of corporate governance is constantly changing and needs continuous tracking and improvement.In addition,by the time this dissertation was completed,a new financial regulation system has been formed in China.Under the new framework,it will be a more valuable subject of research on how to comprehensively utilize corporate governance,industry regulation,market competition and other means to promote industry development.