Asymmetric Information And The Optimal Contract Design Of Automobile Insurance In China

Now a very important reform is being carried out in Chinese automobile insurance field, furthermore insurance market is being opened to foreign insurance agents. So it is unavoidable to meet some various problems, including risks of asymmetric information, involving adverse selection and moral hazard. In order to keep insurance developing continuously, quickly and reasonably, it should be to study the rules of the insurer and insurant's behavior and find out the solutions based on the traits of our insurance market. Firstly author summarize two solutions to asymmetric information problems in this paper. One is market signaling or screening which could evade the adverse selection risks, the other is incentive mechanism which could reduce the moral hazard. According to these ideas, author compare the insurance contracts of American, French and Korean, then analyze their same and different regulations. Besides author use other foreign scholars' empirical research for reference. It is proved that these two solutions are correct and effective.Then author analyze detailedly a sample of automobile insurance contract being used in China, applying theory to practice, benefit from foreign experience, and find out some problems. General speaking, the mode of premium ratio doesn't adapt to the change of market, premium ratio coefficient is reasonless partially, and no-claim bonus clause and deductible clause don't effect in incentive goal. In the end, author conclude several opinions on improving upon the design of automobile insurance contract concerning asymmetric information risk, which are multiplicate insurance production, reasonable premium ratio system, correct choice of premium ratio mode, effective no-claim bonus and deductible clauses design.