Legal Regulation Of Dishonesties In Motor Vehicle Insurance

Honesty forms the basis and foundation of modern market economy. It is what propelsthe development of automobile insurance market. The establishment of automobile insuranceintegrity mechanism is of supreme importance to the comprehensive, coordinated andsustainable development of insurance and even of the whole finance industry. It is urgent toprevent and stop faithless behaviors and to establish legal regulatory system against faithlessbehaviors in automobile insurance. On the basis of a full interpretation of the theory ofautomobile insurance system, the author categories faithless behaviors concerning automobileinsurance into three phases to analyze the cause of it, to borrow from foreign experience andto propose recommendations to improve legal regulations of it. Apart from the preface and theconclusion, the paper falls into five parts.The first part is the general theory of automobile insurance system. First, automobileinsurance forms an integral part of Chinese insurance system. It is mutual help among allpolicy-holders. Secondly, automobile insurance is socially ethnical, economic compensatoryand government interventional. Thirdly, it is the two basic functions of automobile insuranceto transfer and disperse risks. Lastly, author makes a rather deep analysis of the uttermosthonesty principle which is the theoretical foundation of the regulation of faithless behaviors inautomobile insurance and the necessity to regulate it.The second part is to analyze the categorized faithless behaviors in automobile insurance.The automobile insurance contract is divided into three phases: the pre-contract phase, theperiod of duration, and termination. Based on the differences, the author classifies theinsurance activities into the insured period, the period to deal with insured event, and theperiod to settle a claim, and makes an analysis based on the classification.The third part analyzes the causes of dishonesties. First, the internal risk controlmechanism in automobile insurance industry is weak, which shows in the inadequacy of thecredit system, the lack of info-sharing mechanism and the low-ability of practitioners. Secondis the insufficiency of external supervision, which includes the omission of the CIRCregulation, the insufficient regulatory function of the Insurance Industry Association and thelack of smooth path for public participation. Third is the inadequacy of legislation, whichincludes insurance law, anti-unfair competition law and rules to settle conflicts. Last is the restraint of judicial mechanism including severe rent-seeking phenomenon, excessive pursuitof harmony of judicial organs and the unsoundness of docking mechanism.The fourth part is legal regulations of dishonesties in automobile insurance in foreigncountries. There are mainly three modes concerning insurance supervision and regulation: thestrict regulation mode in the US, the loose one in the UK and the compromising one inGermany and Japan. The Insurance Industry Association in the US, UK, Japan and HK allplay their roles in insurance markets in respect of association self-regulation and supervision.The legal regulations of dishonesties in insurance market in the US and Middle East havetheir unique features. China needs to improve relevant legislation concerning this topic, tostrengthen the regulation and supervision of CIRC and to give full play to the regulatory roleof the insurance industry association.The fifth part is the regulation of dishonesties in automobile insurance. First, to improvethe internal risk control ability of the industry from the improvement of credit system, thebuilding of information sharing mechanism and the full play of internal risk control ininsurers. Second, to improve external regulation and supervision from four aspects: thestrengthened regulation of CIRC, the full play of the Insurance Industry Association, theexpanded channel of public participation and the improvement of dishonesty-punishingmechanism. Thirdly, to complement the inadequacies of legislation from the clarification ofutmost good faith principle, the strengthened legal responsibilities of dishonesties, theimprovement of anti-unfair competition law, and the improvement of rules on physical injurycompensation. Lastly, to straighten out the current judicial system from three aspects: theheightened punishment of dishonesties, the establishment of a reasonable mechanism ofcohesion and a benign judicial environment.