Research On The Impact Of UBI Auto Insurance On China’s Auto Insurance Industry

Traditional Automobile Insurance companies are confronted with a number of chal enges and pain points,including financial deficit in insurance companies that deal with automobile insurance,homogeneity of insurance products,and information asymmetry.The reform of the administration system of commercial automobile insurance clauses and premium rate and the development of Internet of vehicles have granted more rights of independent pricing to insurance companies.The newly emerging usage-based insurance(UBI)is attracting increasing attention.However,as a new thing,it will inevitably be faced with many chal enges before its implementation and popularization,and will have certain impact on traditional industries.The main purpose of this paper is to study the impact of the implementation of UBI auto insurance on China’s auto insurance industry.This paper started with an introduction of the domestic and international insurance industries,with particular focus on the analysis of current issues in automobile insurance industry in China.Then the study outlined the status quo,advantages and issues of domestic and international UBI automobile insurance.Based on these,the game theory model for the choice of UBI automobile insurance was constructed to analyze the selection game by insurance companies on the basis of maximum premium income,maximum profit,and scales of insurance companies respectively.Finally,this study conducted game analysis on the competition for market share between insurance companies.The results from game analysis revealed that there is little feasibility for UBI automobile insurance to be implemented on a large scale.Large-scale automobile insurance companies lack stimulus to implement UBI,whereas small and medium size companies may be more motivated to promote UBI automobile insurance by temporarily choosing to lower their profit limit in order to expand their company scale.The further implementation of UBI may prompt small and medium automobile insurance companies to lower their prices to attract more lowrisk customers.When the number of high-quality customers drops to a certain degree,largescale automobile insurance companies will be forced in turn to choose UBI automobile insurance.Automobile insurance companies have to raise the prices for those high-risk customers to ensure the overall premium income and profit,which will force some of the highrisk customers to opt out and lead to increased risk probability.Ultimately,the implementation of UBI automobile insurance will not only impact the competition landscape of automobile insurance industry in China,but also weaken the insurance’s function of social management.This study concluded with further discussions on the necessary conditions to promote UBI automobile insurance and raise suggestions for the development of UBI in China.