Research On The Reverse Selection In Major Disease Insurance

The insurance industry as a means of economic compensation in modern society, together with the banking, securities constitute is the three pillars of modern financial sector. The healthy development of insurance industry has a profound impact on a country’s social stability and economic development. At present, critical disease insurance is quite popular in China and it is designed for certain severe disease categories. However, in China, the critical disease insurance industry is still in its infancy. Development is not perfect, rules and regulations are not sound as well as the problem of adverse selection caused by information asymmetry is more serious. As a result of the existence of adverse selection problem, underwriters cannot completely effective identify the insured risks, they can only be based on the theory of experience data summary and analysis the results. But there is a big discrepancy between the theoretical results and reality. On the basis of design of insurance costs is not always reasonable, which creates a situation that high-risk policy-holder will make low risk policy-holder run out of the market.Firstly, based on the theory of information economics analysis and combined with the actual situation in our country, this study analyze the problem of adverse selection in the fraud of critical disease insurance, analyze inner characteristics and regularity of adverse selection problem, analyze the definition and behavior limitation of major disease insurance’s adverse selection, analyze the harm of major disease insurance’s adverse selection and finally draw a conclusion and find some prevention countermeasures. This paper use the specific critical disease insurance coverage, for example, by investigating the causal relationship between the high forehead and the loss rate to identify the fraud which caused by adverse selection, namely use the multiple regression model and the sample companies of Tobit regression model for special disease insurance coverage, and to pay medical treatment, as a result of the special disease death compensation expenses related to the relationship between the variables. The study tries to do some empirical analysis and conclude the relationship between insurance coverage and the variables.