A Study On China's Cargo Insurance Development

In the 18th National Congress of the Communist Party of China(CPC) and the Fifth Plenary Session of the 18th Central Committee of the CPC, the development concept of innovation was put forward, and the latter session emphasized the core role of Innovation. China's economy has entered a new normal, which means the economy will maintain a medium-high growth, being more efficient, sustainable, and less costly. As one the prominent pillars of current economy, the insurance industry will be China's new growth point. Since the economy has been experiencing rapid growth, China's insurance industry has entered a new period. Opinions about speeding up the development of modern insurance industry, issued by the State Council of the PRC in August 2014, shows the developmental target and direction of the insurance industry. As one of the risk control measures, it has huge development potential.As the product of development of market economy, China's insurance industry has developed rapidly since 1979, however, it's still underdeveloped compared to the developed countries such as the US, the UK and Japan. The development of non-life insurance market is obviously unbalanced, relying mostly on the eastern insurance applicants and motor vehicle insurance. The data show that motor vehicle insurance premium accounts for more than 70% of non-life insurance premium, but each other kind accounts for less than 10%, such as cargo insurance which accounts for about 2%.The economic rising and the upgrade of international status have dramatically boosted the international trade development in China. By the end of 2015, China has been the second largest economy, the largest goods trading country, the third largest foreign investor and the country holding the most foreign exchange reserves in the world. Especially after China joined in WTO in December 2001, China's international trade gradually increases, enhancing its international status and overseas influence. The strategy of One Belt And One Road will further promote international trade. All of the above bring about opportunities as well as challenges for China's insurance industry. However, the development of cargo insurance has lagged, failing to catch up with the economic development. Worse still, negative increase is captured in several single years.This thesis, starting with the introduction of its history and analysis of its feature, proposes that cargo insurance is a special kind of insurance. This thesis studies why China's development of cargo insurance has lagged behind that of international trading, by a comprehensive analysis of cargo insurance with its current development, statictics of underwriting and claim. Through the analysis of the contradictions in practical contract cases of cargo insurance, this thesis further explores the definition deficiency of insured liability in practice. The thesis suggests that in order to promote better development of cargo insurance, we should improve legal environment, improve service level, perfect service network, clarify insured liability, better manage risk and so on.Chapter One is an introduction. Firstly, the background is introduced. In these years, China's economy has kept stable development, while the world's economy is taking a slide. The development of international trading in China is soaring in a prosperous way; however, the development of cargo insurance is lagged. The rest of this chapter is literature review, the research question, and the possible innovation and the deficiency of the thesis.Chapter Two expounds the development of international cargo insurance and its features. It explores the developmental features of cargo insurance from the perspective of marine insurance. Indicated by its own history, marine insurance is born as a result of the international trading. Therefore, in theory, the amount of marine insurance premium should be positively associated with the value of international trade. However, it's not the case. When looking into the data of five selected regions, a different result is discovered. Especially in China, although the amount of cargo insurance premium has been expanding rapidly, it is unstable between years, and accounts for a very small percentage of GDP, showing this kind of insurance is underdeveloped. Considering the mobility, internationalization and complication of the cargo insurance as well as its operational traits, the reasons for the lag are further explored.The development and comments of China's cargo insurance are given in Chapter Three. The comparison between China and London Institute Cargo Clause shows that it's more difficult to judge insured liability under China's marine cargo clauses. China's cargo insurance has developed in a rough style, which is far from mature, accounting for only about 2% of non-life insurance market. However, cargo insurance should be a profitable category of insurance, which property insurance company would focus on.In Chapter Four, difficulties of insured liability judgment in cargo insurance claims are analyzed by case study. It is found that there is no basis for the judgment because of the imperfect relative legal system, poor service arises from the lack of new technology of claims, vagueness of the judgment can result in claim disputes, arranged underwriting style may cause risk, and the responsibility of the insured is not excluded during the warehouse to warehouse insured period. All these above restrict the development of cargo insurance.Suggestions about how to promote domestic cargo insurance are given in Chapter Five. It is believed that cargo insurance has a huge development potential, and both external environment and internal environment should be improved, such as improving legal environment, improving service level, perfecting service network, clarifying insured liability, and enhancing risk management.This thesis may have innovation as follows:Firstly, all examples quoted in this thesis are truly offered by insurance company, making suggestions more valuable. With the author's personal involvement in insured liability judgment, loss assessment and settlement of claims in each example, a critical analysis is made with combination of theory and practice, presenting arguments in a vivid and clear manner.Secondly, adequate attempts are made to analyze from multiple dimensions, including the aspects of the feature, underwriting and claim, while analysis of cargo insurance is partial in previous researches. Finally, suggestions are given from both underwriting and claim sides.Thirdly, analysis in this thesis is based on statistics. Published data are quoted from the United Nations Statistics Division, WTO, Swiss Reinsurance company, International Union of Marine Insurance, China's National Bureau of Statistics and CIRC, making the conclusion more believable and valuable.