Chinese Property And Casualty Insurance Market Structure

This article studies the domestic property and casualty insurance market structure based on the analysis of the sub-types of insurance premium income data, using the market structure measure indicators:market Concentration Ratio, CR4; the Herfindahl-Hirschman Index, HHI; and the Entropy Index, E; and estimated value of b from the Rank-Scale Function. This article compares the validity of the four market concentration indicators to measure the market concentration. As a result, the qualitation of the market structure and the rank of the market concentration of13types of insurance product measured by CR4, HHI Index and Index E are similar. However, the qualitation of the market structure and the rank of the market concentration of13types of insurance product measure by index b of the Rank-Scale Function deviates from the former three indicators. Index b is influenced by the number of companies more significantly while the other three indicators emphasis on the market shares of companies and their distribution more when measuring the degree of market concentration. The empirical results show that domestic insurance market has three characteristics:First, the oligarchy companies’market position is stable; Second, the market concentration of each type of insurance product is high; Third, the various types of insurance’s market concentration tend to decline, however, several kinds of insurance’s market concentration has increased slightly in recent years. The companies which rank first in each type of insurance and the market concentration degree of each type of insurance of the foreign property and casualty insurance market are different from the overall property and casualty insurance market. However, the foreign-asset companies own small share of the overall market, thus it has small impact on the market structure of the overall market. Weed out this slight impact, the market structure of domestic-asset property and casualty insurance market is similar with the overall market. This article analyzed the cause of the property and casualty insurance market structure. The author believes that the administrative polices of the government in the early years of the development of the property and casualty insurance determined the highly concentrated market structure, and the significant positive influence of pro-phase market concentration on the later-phase market concentration maintains the highly concentrated market structure of property and casualty insurance market; the growth of the macroeconomic increased the demands of property and casualty insurance, which increased the number of the insurance companies, thus the market concentration of property and casualty insurance market tends to decline; the supportive administrative polices of the government make several types of the insurance developed rapidly, therefore, the extent of the reduction of those types of insurance markets’ concentration is somewhat different from others’; the oligopoly companies have the motivation and ability to maintain its monopoly status, while the small and medium-sized insurance companies do not yet have the strength of their commander, therefore, the oligopoly status of the oligopolistic companies is relatively stable. This article analyzed competition situation of the property and casualty insurance market under the oligopolistic market structure, I believe that the oligopoly market structure does not curb competition in China’s property and casualty insurance market; the property and casualty insurance oligopoly market reflects the economies of scale; the insurance oligopoly market structure is conducive to the insurance innovation to some extent and helps to maintain the order of property and casualty insurance market. In all, the oligopolistic market structure can help to promote China’s property and casualty insurance market and improve the social welfare. Based on the previous analysis, the article provides some suggestions to build a better market which can promote China’s property and casualty insurance market and improve the social welfare.