On Study Of Economies Of Scope Of The China’s Life Insurance Industry

After accession to the WTO in2001, the number of insurance company is increasing,and the competition is worse and worse in China life insurance industry, marketconcentration is declining. The mode of low levels of extensive expansion has become theconstraints of the sustainable development of the life insurance companies. Therefore,changing the mode of development and improving the operational efficiency is theobjectives of company. Economies of scope is very important influence to company’soperating. Therefore, researching the economies of scope of life insurance company hassome practical significance to improve the operating efficiency. In this paper, we willanalysis the economies of scope of life insurance company by TCF model.Firstly, we review of related research about economies of scope from domestic toforeign. Secondly, we introduce the general principle of economies of scope, and discussthat which cost function is applicable to study. Subsequently, the authors define theeconomic economies of scope of the life insurance industry, and analysis the internal andexternal factors which affect the economies of scope in the life insurance industry.Based on the study, the author use the TCF model, and select a specific input andoutput indicators to observe the dynamic changes and trends about economies of scope ofthe various life insurance companies, and we further analysis the internal factors whichaffect the economies of scope in the life insurance industry. The study results show that:Firstly, the scope of the life insurance industry is not optimistic. Both Chinese-fundedenterprises and foreign-funded enterprises have showed a weak uneconomical. Small andmedium-sized life insurance companies are slightly better than the large life insurancecompanies in economic conditions, the economic conditions for foreign-funded enterprisesare completely superior to Chinese-funded enterprises. Secondly, life insurance business,accidental injury insurance and health insurance business are yet to reach economies ofscope; their complementary effect on cost is not obvious. The business which has the besteconomic conditions is health insurance, and the accidental injury insurance is nothingspecial, the condition of scope of the economic about the life insurance business is theworst, and which is getting worse and worse. In the way of a single insurance company, nomatter what kind of insurance business, the foreign-funded companies are stronger thanChinese-funded companies. Thirdly, life insurance companies which have effective internalcontrol have a better situation about scope of economic. The scope of the economic situation has nothing to do with their size, the nature of the shares, return on assets.Finally, this paper summarizes the research results and further research ideas, andmakes relevant recommendations from the regulatory perspective and life insurancecompanies.