Study On The Profit Issue Of Compulsory Auto Insurance For Insurance Company

The compulsory motor vehicle traffic accident liability insurance system is the first compulsory insurance system prescribed and implemented by national law in our country. This insurance is insured by the insurance company to compensate the victim’s personal injury, property damage in the liability limits. The compulsory auto insurance has been implemented for six and a half years, it played a positive role in terms of promoting the development of road traffic safety, protect the legitimate rights and interests of victims of accidents, reduce the economic burden of the responsible party, maintain social harmony and stability. However, under the current regulatory regime and business environment, most insurance companies have serious operating losses, the market focus on the compulsory auto insurance also from its "profiteering" business questioning to insurance companies operating loss problems. Therefore, how to improve the profitability of the compulsory auto insurance business becomes a serious problem.China’s current mandatory traffic liability insurance business model:the industry associations formulate the basis of the unified national rates in accordance with "no profit no loss" principle, approved by the China Insurance Regulatory Commission and the insurance companies lack pricing power, the insurance company business is not for the purpose of profit and cannot deny coverage for high-risk business, insurance company operate independently and self-financing, the government does not provide any tax incentives. In this case, in the compulsory auto insurance business operations, government and insurance companies are exist unclear subject status and responsibilities. For insurance companies, the operation of the compulsory auto insurance business occupies a lot of capital, but it cannot generate profits for investors. Meanwhile, the compulsory auto insurance business followed by "no profit, no loss" principle is difficult to stimulate the insurance company’s enthusiasm; For the Government, limited by the role of business model, identity is not detached, reducing the social credibility, hard to break away from the question of the public. Moreover, according to "The compulsory motor vehicle traffic accident liability insurance regulations provisions, implement the basis of unified rates in the state, floating rate implementation of a unified standard, there is no difference in urban,rural areas and provinces, the rate does not match the size of the risk, not follow the principles of pricing insurance products.In view of the above problems, this paper use the operating results of10representative insurance companies as the main research object, based on the current problems, compared multiple financial indicators and actuarial indicators, collected information and data on the basis of research results at home and abroad to conclude the key factors that affect the compulsory auto insurance business profitability. The article is divided into six part, the main contents are as follows:The first part is the introduction, put forward questions the paper will study by introduction of the research background, and expounded the significance of this study, the research object, and the main content of the article structure, research ideas and methods, innovation of this paper and further research directions.The second part is reviewing the compulsory auto insurance related theories. First sort of the domestic and foreign existing research result, find out the problems of the existing research institute; then draw on existing research and analysis to identify the direction of this study, this part is the theoretical basis of this study.The third part is the analysis of the current business situation. According to the data of10representative companies has audit financial reports, actuarial reports, respectively from two aspects of the insurance industry and insurance companies discuss the current profit and loss situation of the compulsory auto insurance, found that the compulsory auto insurance has losses in successive years and sinked into acute dilemma of business.The fourth part is analyzing the factors which influence the compulsory auto insurance. From insurance company and insurance regulatory perspectives, use some index such like the comprehensive cost rate, combined ratio, rate of return on investment to research the influence factors and identify the key factors. The fifth part is the suggestions. Propose some target suggestions respectively from the two levels of insurance companies and the regulatory regime based on Part Ⅳ.The sixth part is the conclusion. Summarize the full text of the declaration viewpoints, describe the problems may existed to achieve the purpose of perfecting the paper.In this paper, taking a comparative analysis of research methods, through the use of operating profit margin, comprehensive cost rate, combined ratio, rate of return on investment and other data respectively from the horizontal and vertical compare the business situation, summarize the main factors affecting the profitability of the compulsory auto insurance and make suggestions.The innovation of this paper:First, expansion of the scope of research. At present, most of the treatises about the compulsory auto insurance are focus on the industry system, comparison of the business model between domestic and international. There is no data to support the analysis. The paper will analyze on the base of some information and determine the key influencing factors. Second, the innovation of research objects. At present, the study on the compulsory auto insurance is limited to the analysis of institution, formulate of the rate and legal responsibility. The study on the compulsory auto insurance business profitability question from the micro-level of the insurance company is also blank. This paper selects10highly representative audit reports and actuarial report of the insurance company to study on the problem of profitability.This is the first in our country.In summary, the analysis demonstrated in this paper, can help the insurance company to seize the key factor of profitability and improve profitability. Help the compulsory auto insurance business to play a more effective role in social protection and better serve the community. Meanwhile, providing guidance to industry associations and regulatory bodies continue to explore and improve the system of regulations and policies to the compulsory auto insurance business to create a good regulatory regime and market environment.