The Economic Analysis Of Insurance Regulation Based On Game Theory

Insurance regulation is always a very important problem, which supplement each other with finance regulation, social security and economic development. Especially for the situation that in china today the insurance industry still has a small size and doesn't have strong market strength, it is with great signality to the all-around development of the industry. However, the research on the problem in the past in our country mainly focused on the matters such as regulation pattern, solvency regulation and premium rate regulation and so on. Because it mainly rests on actual practice, there is a lack of theoretical research, especially a lack of the research normatively using the framework of economic theory. Based on the careful analysis of the development and regulation state of the insurance industry, the paper established a regulation model using game theory and principal-agent theory, hoping that some meaningful trying about the theoretical research would be given.Using principal-agent theory, the paper analyzed the problems of insurance regulation such as regulation strength, regulation cost and punishment fee etc. under non-symmetrical information. The research found, when there are more high efficient insurance companies, the regulatory official should increase regulation strength, and when the efficiency gap between high and low efficient companies is bigger, the regulatory official should also increase regulation strength.The paper considered the situation that the consumers would recognize the insurance company might not be able to afford completely or might even go into bankruptcy when they were buying insurance, established a game theory model between insurance companies and policy holders, and analyzed the problem of optimum premium and optimum capital investment of insurance companies. Based on the analysis, the paper introduced the restraints that regulatory official imposed on the bankrupt probability of insurance companies, and found under the condition there are no assurance from regulatory official, it isn't feasible to let insurance companies automatically offer guarantee slips with low premium but high solvency.