Hidden Information Problems Of The Property Insurance Market Based On Game Theory

In 1980 China's insurance industry was resumed and, since then, property insurance service has been booming and become one of the mainstays of financial industry. Nevertheless, due to a relatively late start and weak base, by now the study and research about theories of property insurance remain lagging behind the development of insurance business. So, some problems have been emerging in practice, such as quality uncertainty and adverse selection. They put insurance companies at a high risk of benefit loss. Faced up with the potential risks, people working in insurance industry urge that scientific theory should be used to instruct practice. The research in property insurance has to be further enhanced. It is both significant and emergent to conduct research which is aimed at hidden information within property insurance business. Game theory, commonly known as a basic analyzing approach of asymmetric information, can be properly applied in research towards hidden information within property insurance business.This thesis will mainly concentrate on the hidden information in property insurance market on the basis of game theory analysis. A range of assumptions will be raised and elaborated, such as why there is problem of quality uncertainty, how to deal with it and how to prevent and control adverse selection. In details, the following task will be accomplished.1. Summarizing and reviewing on the problem of hidden information in insurance industryIn terms of quality uncertainty, there is rarely any study conducted in other countries, which mainly results from its special background and insurance industry characteristics. Many foreign scholars tend to categorize information asymmetry into two classes—adverse selection and moral hazard—and the former is a direct blend of quality uncertainty. What's more, since western insurance markets are mature and possess a quality credit system—also known as market credit (the best way to solve the problem of quality uncertainty)—there is not a strong motivation for foreign expert to look deeply into the issue. However, scholars from both China and overseas have paid much more efforts and attention on adverse selection. Relevant documental materials can be classified into two groups—one concerning adverse selection theory and the other focusing on the solution of this sort of issue. This thesis will summarize some of the classic materials and, on the basis of this, sum up in six methods to prevent adverse selection. Both merits and drawbacks will be mentioned during the analysis.2. Analyzing the market makeup and features of property insurance industry in ChinaAs different property insurance markets are differently composed and featured, problems of hidden information vary from each other. The analysis of Chinese property insurance market in terms of its makeup and features is motivated by the idea of pondering over and finding out the peculiar features of hidden information in...