Performance Analysis On Chinese Life Insurance Companies’ Product Diversification

Since the policy of reforming and opening, the insurance industry, after its rapiddevelopment of nearly three decades, life insurance companies in the market has beenover sixty. After a long period of extensive growth, thanks to Ping An Life, PacificLife, China Life Insurance, New China Life,Taikang Life Insurance and other largecompany’s guidance, our insurance products have achieved progresses from simplicityto complex in product form, short-term to long-term in Period of insurance,singleness to comprehensive in coverage, and singleness to diversification in Saleschannels. In this context,Life Insurance Companies need to make decisions: What tochoose between product diversification and specialization? what products to carry out?How to implement the Product diversification Strategy?In order to answer the questions above, this article is committed to find out therelationship between product diversification and life insurance company’s operatingperformance with a combination of theoretical and empirical research methods. So as toget answer to: What impact product diversification wouldcause? Positive correlation ornegative correlation?What kind of product diversity may better serve insurance firms?Firstly, this thesis reviewes and appraises the relevant documents aboutdiversification.Then it defined product diversification both in product distributionchannel and product form diversification. Next, product diversification and its’specific contents are described in detailed instructions.on this basis, combined withtraditional diversification literature and insurance risk management theory this thesisexplained how the company’s product diversification may affect performance. Theempirical part of the thesis carries out an empirical analysis by takinga sample of28lifeinsurance companies, a total of six years of panel data, using the entropy index to measurethe degree of diversification, and principal component analysis to get the comprehensiveperformance indicator from multiple performance indicators, combining multiple controlvariables using TWO-WAY panel regression analysis for empirical analysis.Theempirical result shows that the product channel diversification and moderate productformdiversificationhave a significant positive incentive on performance.