Application Of The Var In The Moral Hazard Assessment Of The Health Insurance

Moral hazard is common in modern economy and society. And, it makes ineffectiveness and waste in resources configurations. So Moral hazard is always concerned by the most risk managers, and regarded as a troublesome problem.In the operation of the health insurance, most insurance company always select many hospitals in the medical market available to support the business of the company and meet the medical needs of the policy holders. In the system, the expenditure of the medical services to the policy holders will be proportionally compensated by the insurance company according to the items covered in the policy. So there are in fact special contracts, interpreted by the principal-agent model, between the insurances companies and the medical services. The existence of the contracts is the very key factor to make the insurance companies expose to the moral hazard. For the economical rationality, the moral hazard will never disappear. The system provides it the natural soil to survive.The paper will not represent the method to control the moral hazard, but outlook how serious the companies expose to the risk by means of VaR. Meanwhile, it will formulate the detailed procedure to quantify the VaR index. The framework of the paper is arranged as follows:The first section will show you the situation of the Chinese health insurance market under the moral hazard and the inevitability of the moral hazard. On the other hand, it will figure out some good examples and helpful experience at home and abroad to systematically keep the risk under control.The second part will introduce the history and the fundamental theory of the VaR model. At the same time, the section will illustrate the application of the model from a certain aspects. On the contrary, some faults in its application will be pointed out.In the third part, a VaR formulation procedure will be detailedly presented. It's...