The Impact Of Interest Rate Liberalization On Commercial Life Insurance

Interest rate market has brought a lot of changes to the financial industry. As in insurance industry, the fund management and underwriting business are regarded as the two wheels of insurance. With the development of the life insurance in China, it become more and more important. This research’s content is that in the process of promoting the interest rate market, how many opportunities and challenges China’s life insurance companies will face, what is the best way to remain invincible in the competition.In general, changes in interest rates will affect the assets, liabilities and profit and loss of insurance, and also will affect the insurance buying policies of the rational policy holder. Interest rate liberalization affect insurance companies mainly through four channels of:first, influence insurance investment income by the securities market; second, influence products’ design, development and sales by the interest rate of insurance products; third, affect the premium income by economic and consumer demand; fourth, affect the cost of insurance and underwriting profit.In the process of promoting the interest rate market, the scale of life insurance industry in China has maintained steady growth, which has been dominated by the insurance market. But the life insurance industry competition intensifies, and the degree of market concentration gradually decreased.Through SWOT analysis, we find that the advantage of life insurance industry is that it has the both function of security and finance, strong risk control ability and sustainable development. The disadvantage is its sensitivity of interest rate and the limited integrated financial. By the interest rate liberalization, the opportunity of the life insurance industry is to enhance the efficiency of the market service, the more flexibility in the regulation, the increase of the insurance demand, the increase of the solvency, the elasticity of the rated interest rate, the increase of the fixed income and more investment choices. The challenge will be the difficulty of the rate of increase, new product development pressures, short-term premium growth pressure, homogeneous product competition more intense, asset liability matching risk and investment income instability. As a representative of the life insurance companies, Xinhua Insurance’s advantages and disadvantages are very obvious, in recent years, its premium continued to grow, its investment target constantly rich, so its profits get a sustained growth. But Xinhua Insurance also faced with the risk of a decline in premium growth and market share. And product transformation pressure is quite heavy. To this end, the Xinhua Insurance make some corresponding countermeasures, including product innovation, vigorously develop asset management business, and promote the comprehensive financial services.The conclusion of this paper is, there is a close relationship between interest rate marketization and commercial life insurance. The former influence the latter has in both positive and negative ways. The best response of commercial life insurance is foster strengths and circumvent weaknesses.