China's Insurance Market, Asymmetric Information Problem - An Economic Point Of View Analysis

Facing the development of information economics as an important part of modern economics and serious asymmetric information between our insurer and insured, the paper studies solutions to these asymmetric information problems in our insurance market from information microeconomics.Based on the classification to the asymmetric information from the aspect of time, the paper discusses causes and disadvantageous results of the insured's' adverse selection and moral hazard in our insurance market respectively. It proves that solving our asymmetric information problems is very important and urgent. Then the paper constructs a prisoners' dilemma model in insurance market and compares several mechanisms likely propelling cooperation between both insurance sides, which draws a conclusion that the incentive mechanism is the best strategy to alleviate information asymmetry and solve the prisoners' dilemma in our insurance market.According to the type of the countermeasure models in information economics, the paper firstly describes and comments on the Rothschild-Stiglitz screening model applying geometric method of the partial equilibrium. Next, the paper constructs the static insurance decision-making models in different moral hazards and a two-stage dynamic model. They together constitute the paper's theoretic foundation on the measures and suggestions to solve the asymmetric information problems in our insurance market. Through these analysis and conclusions of the models, the paper receives three revelations: applying the screening model to alleviate insured's adverse selection, employing different risk-sharing modes to deal with all sorts of insured's moral hazards, and replacing the current no-claims-discount mechanism in our auto insurance market with the no-claims bonus-malus mechanism.In the end, the paper puts forward five methods to resolve the asymmetric information problems in our insurance market, including: positively engaging in information search, fully exerting government's compulsion, effectively carrying out screening mechanism, flexibly employing risk-sharing system and revising and broadening our no-claims-discount mechanism.