The Study On Introducing Settlement Method To Life Insurance Surrender In China

In the second half of 2014 and January to May of 2015,the stock market as well as the surrender rate rose sharply.This is similar to the situation in 2007 to 2008.In the extreme conditions of surrender tide, the insurance companies,especially the life insurance companies, will face a lot of difficulties.The difficulties include liquidity problems, financial crisis and so on.The existing operation of surrender will do damage to the insurance companieS,insurance agents as well as insurance policy holders.When there exists surrender,especially when large-scale customers want to surrender,the well-developed investment plan of insurance companies will be disrupted,enormously affecting the company’s investment income.As a result, for the insurance,companies, when surrender occurs,they will suffer from business risks and financial pressure.And in order to reduce the losses caused by surrender,they have to increase their deduction of termination.This will decrease the value of the surrender and do damage to the market image of the insurance companies,resulting in a lose-lose situation of the insurance companies,the insurance agent, and the insurance policy holders.With the great improvement of information technology and computer science,the traditional operation of life insurance has been changed gradually.The application of information and Internet technology brings development opportunities to life insurance.In addition to the innovation of new products and organizational structure,the costs of many life insurance services have been declined sharply. With the development of Internet finance and large data medical system,the personalized surrender services for medium and small-sized customers became possible.In America,there is already a new and successful attempt in life insurance surrender market.It is called life settlement (settlement, for short).In the market of settlement, there are many necessary agencies,such as sellers, agents, buyers and investors.These agencies communicate with each other,and securitize the insurance policies through trading.To ensure the fairness of the new market,the government of America has passed many relevant laws.Nowadays,the settlement market of America has already become mature.Learning from the successful and innovative experience,this paper discusses about how to introduce settlement method into China’s surrender operation,and introduces the advantages and feasibility of this new integration.First of all,settlement and surrender are similar in form and have different advantages.So the integration will make a better system.Secondly,the new operation system has the advantages which the separated two don* t have.The form is simplified,which can reduce the cost of intermediary institutions.And the damage caused by surrender is smaller.The mode of operation of the new form is similar to the settlement method in the US,but also have many specific characteristics.The participants include insurance companies, sellers, commercial banks,medical institutions, and investors.And the insurance policies are securitized.When the operation is mature,the insurance companies can also make a deal with commercial banks and return the value of the policies to the sellers in advance.By doing this, the insurance companies can cancel the policy target more quickly,and make the securitized financial product become independent.What’s more,it will help the sellers as soon as possible,who are usually eager for money.However, as a new thing,the implementation of this new system will be faced with a lot of difficulties.This paper also discusses about this,and comes up with some suggestions to solve them.The difficulties involves in technical and legal aspects.To solve them,we should try to improve the financial environment,and develop the relevant industries such as medical judgement.The risks are variant, including technical risk, credit risk,structure risk,interest risk and moral the risk of moral hazard.For these risks,what we can do is to form a fair and open market,and construct the credit system.In a word,introducing settlement into surrender operation is creative and practical both in form and essence.It will influence the development of China’s capital market in a very positive way.