A Research On The Problems Of Asymmetric Information In The Automobile Insurance Market Of China

With the development of Chinese economy, the automobile insurance developed from scratch, and it has been developing rapidly, ranks the first biggest insurance code of property insurance. However, the beneficial result of automobile insurance is not consistent with its rank, the loss ratio is very high, and the whole business is facing the deficiency. Many people think that the main inducement is asymmetric information, which restricted the development of insurance seriously, also there are many scholars find that the asymmetric information existed in the automobile insurance market theoretically, but whether it is really the fact, the empirical analysis reveals most. Based on the existing empirical analysis theory, this thesis takes advantage of the data of commercial automobile insurance of a domestic insurance company in China to explore the problem of asymmetric information in China's automobile insurance market, and points out the evidences that proved the existence of such problem, also proposes the corresponding solutions. It aims to improve the benefits of automobile insurances in China; therefore, it has the important practical significance.Starting from the asymmetric information theory, it explains the study backgrounds and the significances of selecting the topic of this thesis. The so-called asymmetric information refers the discrepancies of the relevant information that all kinds of people accessed in the market. The asymmetric information is easy to cause the risk of adverse selection and moral hazard, and these two kinds of risk jeopardize the insurance market greatly. In recent years, Chinese automobile insurance market develops rapidly, but the loss ratio is always high, and the whole business faces losses; the asymmetric information that the insiders estimated have a great compact on this; therefore, this research has the important and practical guiding significance. Based on the literature review of home and abroad, the process of the empirical analysis model which inspects asymmetric information problem in the automobile market is given; and so are the specific situations and empirical results of literature review home and abroad. In most cases, empirical analysis is significant to the reality; therefore, this article explores the asymmetric information problem in the automobile market by models and empirical methods.Then starting from the empirical analysis model proposed by this paper, the application methods and the formation of sample data are introduced. The equations and the specific usages of the model are firstly given, and then the formation of the sample data and specific ways of usage are introduced in detail. The data in this research is from a domestic insurance company, there are 115168 samples totally, it is a large amount of data, which is a highlight in this thesis. This paper firstly presents the specific selection and definition of the exogenous variable which controls the risk of insured; then the sample data will be parted according to the different analysis purposes. In this paper, vehicles are divided into three different types: vehicles of individual, of collective for non-operating, of operating; they are still divided by different areas. In addition, for individual vehicles, the sample data will be further divided according to the tenure of use. All the classifications make preparations for analyzing the problem comprehensively and the empirical analysis in the next chapter.The Chapter Three is empirical analysis. In this paper, the samples are analyzed practically and theoretically. According to the contrast analysis, the evidences of the asymmetric information existing in the automobile insurance market are obtained, and this problem exists universally. It exists in different regions, in the aspect of different properties and in the different lifetime of vehicle. Through the consideration of the relationship between loss ratio and W value, the reasonable explanation for the results of the theoretical analysis is put forth. The explanation is that the degree of severity of the information asymmetric problem is inversely proportional to W value, i.e. the larger the W value, the less the degree of the problem, and vice versa. According to the analysis, there are discrepancies of the degree of severity when the information asymmetric problem is in different circumstances. The problem in the individual vehicles is the most serious; Among the four regions involved in the sample, the problem in Beijing is more serious than the other three provinces; while in the individual vehicle market, different lifetimes of the vehicles, and different degrees of the problem. Finally, in this paper, the existence of the moral hazard is tested by the Chiappori & Salanie (2000) condition related inspection method,which details the result.According to the results of empirical analysis, some proposals which can solve the problem in the automobile insurance market are given in this paper. In order to improve the situation of business of the automobile insurance market and to reduce the impact on the automobile: firstly, the scientific products should be developed; humanized provisions should be made, and the content of the provisions should be perfected in the operation; the new products should be launched at appropriate time so as to meet the demand of the market. Secondly, the premium rate should be perfected, and the development of the premium rate should be in accordance with the market; the multiple factor of premium rate making methods should be improved, let more multiple factor add to the premium rate of insurance and to make the system of the premium rate can distinguish the risk of different policy-holder. Finally, the internal control of the insurance company should be strengthened; the company should not take malicious competition to affect the normal order of this business for their own interests. The insurance company should formulate reasonable underwriting and claim policies and take strict precautions against the risk of"import"and"export", the companies should not give up the control of risk in order to increase the business, they ought to try to do the claim work better, and not let the insurer lose confidence to the insurance company; the BMS rewards and punishment system also should be perfected, and the company should draw a clear-cut line between reward and punishment, which caters for the psychology of customers and keeps the high quality customers. In addition, the training of quality and morality for the employees should be reinforced in order to improve the service and prevent the fraud which is made by the internal personnel and the external personnel.After the analysis, asymmetric information problem in Chinese automobile insurance market is found, this problem is common, and some or all are caused by the moral hazard; the analysis also points out that there are differences between the problems, the severity degrees of the problems are different in different circumstances of the insurance market. In the conclusion, some suggestions are given based on the results of analysis to solve the asymmetric information issues, such as the perfecting the provisions of automobile insurance, completing the premium rates, strengthening the internal controls of the company.