Research On Adverse Selection And Optimal Insurance

Information is a key factor in market transactions,who has grasped the information, who has grasped the transaction initiative.While information superiority will use of information deprivation to the shortcomings in their profit-making. Extended to the insurance market, applicant for subject of insuring private information than the insurer, when he learned the trading initiative, you can gain for yourself through the loopholes in the system, this information asymmetry phenomenon led to the insurance market distortion in resource allocation, functioning of market mechanisms would not be effective, harmful to the healthy development of China’s insurance market.I think there is a fast-growing insurance market in China, based on the following three reasons:(1) as the first industry China economy gradually by the manufacturing industry of the transition to the third industry services(2)The Commission for the whole of the insurance industry in the "ON" and "loosening" the way that insurance companies give more innovative development authority。(3) The Insurance density and depth there is a very large potential for digging.the problem of adverse selection as harm one of the major problems of insurance market, must give great attention。this paper using mathematical modeling and simulation of the empirical method, the problem of adverse selection of insurance market and made a research on the optimal insurance.The problem of adverse selection is the first Akerkof (1970) found that the second-hand car market, because buyers and sellers of information asymmetry, leads to the inferior car will drive the car phenomenon.Rothschild&Stiglitz(1976) for insurance market equilibrium under incomplete information are analyzed a classic, for the two kinds of the insured, the pooling equilibrium does not exist, the separating equilibrium may exist, or may not exist view. Russell Cooper&Beth Hayes (1987) in a multi period insurance contract in the text, the probability of asymmetric information of the insurance contract the insured accident. Amy Finkelstein&James Poterba (2004) in the adverse selection and statistical discrimination cases the Canadian auto insurance market, the adverse selection caused by the insurance company risk classification mode, will cause the statistical discrimination。Liu Xihua in domestic literature, Wu Yu hua (2003) explains the concept of the moral risk and adverse selection and its mechanism, and from general sense gives strategies to avoid adverse selection and moral hazard.this paper is divided into6parts, each part has some relationship with the latter part。The first chapter is the introduction part, from adverse selection and background of the research on optimal insurance theory, and introduces the related domestic and foreign research present situation, research results.finally introduced the research contents, the innovation of this paper, shortcomings.The second chapter the adverse selection of insurance market made explain profound theories in simple language analysis, first from the theory of asymmetry information, analyzes the causes of information asymmetry.introduces the adverse selection from the labor market and the insurance market, and then analyzes the causes of adverse selection from four aspects reasons.finally analyzes the adverse effect of insurance market with adverse selection.In the third chapter describes the optimal insurance contracts under asymmetric information and asymmetric information in the first place, clearly define the optimal insurance contract concepts, under the asymmetric information, Followed by the expected utility is optimal in the sense of insurance underwriting both full underwriting and qualified analysis, qualified underwriting loss related, and payouts are examined in two situations related to premiums and deductibles.Finally from the homogeneous risk with no hidden information, hidden information risk-free quality, risk of hidden information under three different quality perspective, to achieve balance in the insurance market are briefly analyzed.In the fourth chapter is combines reverse select and optimal insurance for analysis, first on exists reverse select of optimal insurance design of thought for has described, second according to Rothschild and Stiglitz (1976) of research conclusions, sold policy used confused with and separation two species forms, used mathematics proved of way, tries to from high risk type and low risk type of share to judgment which species sold policy of forms is suitable of and policyholders whether can obtained full insurance. Finally from the insurer’s profit maximization standpoint, using exponential distribution and gamma distribution types to fit separately insured risk distribution and utility function, attempting to construct a risk type-variables are the optimal insurance contract.In the fifth chapter, with reference to foreign classics, summarizes alleviate adverse selection to five kind of thought the optimal insurance design, respectively, the main meaning of thought in practice and their advantages and disadvantages for example to explain profound theories in simple language analysis. Hope to do some reference to the insurance company to reduce adverse selection in practice.In the sixth chapter of reducing adverse selection basis to achieve optimal insurance five kinds of thoughts, because of a kind of auto BMS system belongs to the multi period of the contract, the first advantage and the definition of BMS is introduced, and then learn from negative two claim frequency model from traditional, trend risk classification ability and the premium level of simulation test system of the car BMS. The BMS system has the ability to distinguish good for the type of risk insured, but for high risk type of the insured to distinguish ability will weaken the conclusion.Optimal insurance articles for domestic study of adverse selection is relatively small, most of the research on adverse selection in insurance markets article is a qualitative analysis, quantitative is relatively small, characteristic of this paper is:(1) information from symmetric and asymmetric information, and clearly defined the meaning of optimal insurance.(2) analysis of adverse selection and optimal insurance together, and all variables are quantified, utility maximization and profit maximization by insurers from the policyholder perspective for analysis.(3) using computer simulation methods to validate the auto insurance BMS system is to alleviate adverse selection.