A Study About Product Diversification And Its Effect On Operating Performance Of Bank-Involved Life Insurance Companies In China

The cooperation of bank and insurance has always been the key issue of insurance industry. There has been a simple cooperation model soon after the insurance industry began to recover. The simple model which Banks and insurance companies signed a sales agreement to cooperate lasts a long time. At the beginning of 21s century, a financial group holding model appeared. Companies which take this kind of pattern are the generalized Bank-involved insurance companies. Compared with the sales agreement model, the financial group holding model is a deeper cooperation model. After several years of development, the cooperation of bank and insurance stays in sales agreement model substantially. In 2009, the State Council approved that the commercial banks can purchase stock of the insurance companies. The equity cooperation model was born in our country. Companies using this model are narrow Bank-involved insurance companies.Whether Bank-involved insurance companies are good or not, people have different answers. Some believe that Bank-involved insurance companies can count on banks in virtue of their bank branches and customer resources. And others think when Bank-involved insurance company hold its bank it will loss the the whole forest of banks. Many scholars analyze how should Bank-involved insurance companies develop in the future in theory. Almost all scholars mentioned that Bank-involved insurance companies need product innovation and diversify its product portfolio. The relationship between diversification and performance has not unanimous conclusion.The aim of this paper is to study the relationship between product diversification and performance about Bank-involved life insurance companies of China.This paper selects ten generalized Bank-involved insurance companies as the research sample. Generalized Bank-involved insurance companies include two types. One is the insurance company having a bank as shareholder. Another is the insurance and bank belong to the same financial group company. Based the on theoretical research and characteristics analysis of Bank-involved life insurance companies, the author selects the companies to study the relationship of product diversification and performance about Bank-involved insurance companies by empirical analysis. The research enrich both the Bank-involved insurance companies' empirical research and the research about diversification of China's insurance industry.This whole paper covers six chapters. The contents are as follows:Chapter one is preamble which presents the background, significance, ideas, methods and innovations and shortcomings. Also the concept of the generalized Bank-involved insurance companies, product diversification and insurance company performance is defined.Chapter two is literature review. The related researches about diversification and performance of both insurance companies and general companies from domestic and abroad are analyzed. And the relationship between diversification and performance in general are diversified premium, discount, independent and nonlinear.Chapter three is about theory research of product diversification. The scope economy theory and diversification of risk theory, transaction cost theory, commissioned by the agency theory are introduced. Also the paper analyzes the relationship of life insurance companies and these theories.Chapter four is the theoretical analysis about the relationship between product diversification and performance of Bank-involved life insurance. Based on the analysis of characteristic about Bank-involved life insurance, the author analyzes the particularity of relationship between product and performance of Bank-involved life insurance.Chapter five is the empirical study. The author proposes hypothesis based on the theory study. Then selected data from 2009 to 2014 about ten Bank-involved life insurance companies. The explained variable is comprehensive performance score which is based on PCA. And explaining variables is the modified-Herfindahl index which measures both product form diversification and product channel diversification. The scale of the company's assets, asset liability ratio, increase rate of premium income, expense ratio, and the dummy variables(whether the insurance company has a bank as shareholder) are defined as control variables. And then the regression model is established to test the hypotheses. Finally, the author carry out the robustness test.Chapter six is conclusion and suggestions. According to the above research, the author drew four conclusions. And then relevant suggestions are proposed.The main innovations of this paper have two aspects:firstly, the unique perspective. This paper tests the relationship between products diversification and performance from the perspective of Bank-involved insurance companies. Although there are many research about product diversification and performance, there are still no domestic research about Bank-involved insurance companies. This paper makes up for the blank. Secondly, innovation of research content, the research studies products diversification from the product form and channel. And also control variables in line with the characteristics of Bank-involved insurance companies are selected. Whether the two different types of Bank-involved insurance companies make a difference to company performance is also tested.