Study Of The Relationship Between China's Life Insurance Industry Market Structure, Efficiency And Market Performance

Industrial organization has always been focusing on market performance, especially the influencing factors in market performance such as relationships among market structure, market efficiency and market performance. Thereupon, appropriate industrial policy to improve market performances can be worked out. As to relationships among market structure, market efficiency and market performance, there are mainly two schools——efficient structure hypothesis and the SCP structure hypothesis. A lot of theoretical and empirical researches on the two major hypotheses have been done, but their application in the insurance industry is insufficient. Researches on the insurance industry is empirical, not theoretical. With the rapid development of the insurance industry, It is very meaningful to study the SCP relationship in life insurance industry, compare performance and efficiency among different types of life insurance companies, find reasons that lead to the differences and then make proposal for the improvement of the market performance of China's life insurance industry.The conclusion of this article is thatThis paper classifies the structure of China's life insurance market as oligopolistic one. Two reasons account for the structure. First, policy barriers play the major role. Second, the larger the life insurance compay, the higher the overall efficiency, which is showed by the DEA analysis on the sample data of 20 life insuarance companies from 2003 to 2009. The overall efficiency in Chinese-funded life insurance companies is higher than in joint ventures and foreign-invested life insurance ones, but it is very low in China's life insurance market. There are two reasons:first cultural differences exist in joint venture company; second, small life insurance companies do not fully exploited economies of scale. Then performances in life insurance companies of different features are analyzed from two perspectives——profitability and solvency. the profitability of the Chinese-funded life insurance company is higher than joint venture and lower than the foreign-invested. There are two indicators to inspect the solvency. First, the loss ratio index. overall loss ratio is very low in China's life insurance company, but is higher in the Chinese-funded companies is higher than in the joint ventures and foreign-invested companies. Second, the reserve. The reserve capital in the Chinese-funded life insurance industry as a whole is low, but is higher in larger companies than in smaller ones and is higher in Chinese-funded than in joint ventures and foreign-invested ones. In general, the overall performance is not good. Rate of return on assets is negative but in upswing, and the level of performance is slowly increased. Finally, it can be concluded that in China's insurance market, the relationship between market structure and market performance is not in line with the SCP hypothesis or the efficient structure hypothesis through empirical study econometric software panel data on China's insurance industry market.Finally, we make proposal of improving the market structure and performance of china's insurance industry from the perspective of the government and the industry itself.