The Analysis Of Auto Insurance Regulation Mechanism And Pricing Method Under The Marketization Trend

Two layers consist of our commercial auto insurance system:regulatory and products. In the past, China’s commercial insurance has been subject to relatively strict regulatory controls and almost unified pricing. However, with the auto insurance market getting maturity, regulators sought to adjust the whole system. After several years of preparation, China’s new commercial auto insurance reform started in April 1st,2015. Six regions acted as pilot areas to practice the new policy.This article mainly focuses on the commercial auto insurance reform combined with this new reform. As the market system has two layers, the reform also consists of two parts correspondingly. They are regulatory mechanism and actuarial pricing method, both of which will be analyzed in this paper.In the perspective of the regulatory mechanism, this paper begins with the history of regulatory mechanisms and measures, trying to clarify the regulatory approaches, and summarizes the purpose of adjustments in regulatory mechanisms. Combining with the current reform measures, we make some analysis about the intention of the reform and the links among various aspects of the new policy.In the perspective of the pricing system, for the reason that the new commercial auto insurance reform just started, there is few relevant information and research result of it. So this paper analyzes the drawbacks of the conventional method of insurance pricing at first. Then we analyze long-term influence of the new pricing principles and raise a new pricing model which is different from the traditional method. We explain the advantages of the new method, and embark on an empirical research of auto insurance pricing.The prevalent model for auto insurance is generalized linear model, which is a generalization of the traditional linear regression model in the error term distribution and link function. This paper selects a total of 705,062 auto insurance policies in 2010 to 2012, from a leading domestic property insurance company’s province branch. Then we make a classification to identify the risk level of individuals. Many factors including the vehicle type are taken into consideration. Finally, we focus on the partial-whole ratio. Then we draw conclusion about the appropriate calculation methods of premium, and the necessity of taking vehicle type into consideration.In the last part of this paper, we argue that the process of reform will last for a long period of time. Hence, we put forward with some proper reactions for regulatory, pricing and property insurance companies in face of the "reform era".