Research On Insurance Diversifcation And Its Patterns In China

The development of economic globalization and liberalization accelerates the speed of the evolution of financial diversification. As China's economic reform and openning up is deeping, market economy is sound and perfect, and the speed of development of insurance is so rapid.Chinese insurance management pattern is facing with enormous challenges.Insurance companies must to transformate management strategy.The diversification has been proposed in many topics. Diversification of insurance company is not a new issue, but an area needed to be explored urgently. Over the past ten years, We have made more fruitful results on the theory and empirical research about enterprise diversification,but not enough on diversification about insurance companies. But, we must to see and recognize the fact that the study on diversification of the insurance company is still on sporadic research and analyse stage. Study fulled of rich color theory is fewer. The themes of insurance diversification were fewer too. This paper studies the theory and empirical research on insurance diversification and its patterns in China on the basis of carding of domestic and foreign literature systematicly.This research is wished to further enrich the theoretical research of insurance diversification in China, and to provide theoretical supportments on diversification of China's insurance companies ,and either to provide references on the choice of management patterns and risk management in Chinese insurance companies or to provide suggestions on financial supervision and its policy in China.The paper includes introduction and eight chapters, the main contents and views are as follows:Firstly, the paper defines and makes a comparison with diversification and mixed management and comprehensive management of insurance in the introduction.The insurance diversification is an growth action and strategy of enterprise,which insurance company engages in business outside the area of the leading industry. In this paper, the insurance diversification is the most broadest concept,including insurance, finance and industry three kinds of businesses.The mixed management and comprehensive management are marked with advanced features of history.They can be integrated under diversification frame.Then, the paper wants to systematicaly study the history, current status and future orientation of Chinese insurance diversification.Chapter 1, Diversification theory and its review. Firstly,this chapter makes a review of the theory about erterprise diversification and insurance diversification. We find that the topics about diversification of the domestic insurance companies were fewer, most of the literatures focused on the mixed operation and the comprehensive operation,and related researches scattered unsystematically.Empirical studies were too weak,which had limited the further development of theory.Chapter II, The strategic transformation and the choice of diversification in foreign insurance companies.Firstly, this chapter analyses theoretical foundation of insurance diversification: scope economy thoery, portfolio theory and transaction costs theory. And then analyses the strategic transformation and the inevitable choice of diversification in foreign insurance companies from the perspective of individual enterprise growth and enterprises evolution.These three analysises above are theory supportment to diversification of Chinese insurance companies. Further, this chapter analyses the diversification of Netherlands , AXA of France, Allianz of Germany and AIG of American, which has a reference to China.Chapter III, The evolution of insurance management pattern in China and the choice of diversification. This chapter reviews the evolution of insurance management in China.And then analyses the necessity of insurance diversification in China from external pressures and internal force. However, not all insurance companies have the basic conditions of diversification.At present,internal conditions should be considerated especially.This chapter points out that the resources and scale of enterprise are the critical conditions at present in China,and the diversification should be carried out among those insurance companies with larger scale. For most insurance companies,they have no requirements to choose diversification,but to choose specialization.Chapter IV,The diversification pattern of chinese insurance companies. Enterprise diversification pattern includes business pattern, way pattern, organization pattern and management pattern. Organization pattern includes: strategic alliance pattern, the insurance holding company pattern, multiple business pattern. This chapter points out that China's insurance should continue to promote the strategic alliance pattern,and the pure insurance holding company pattern should be the best choice for China's insurance. Multiple business pattern isn't suit to Chinese insurance companies.Chapter V, The risk and risk management of diversified insurance companies in China. Diversified insurance company is not only facing the general risks from managing the businesses , but also facing the risks from the choice of organization patterns and way patterns.Most foreign diversified insurances have applied ERM(enterprise risk management) philosophy. This chapter analyses the current status and issues of ERM in Chinese diversified insurance, and proposes a ERM framework and some comprehensive thoughts from these aspects:a structure of ERM; internal control system based on corporate governance;objectivesand contents of ERM;ERM techniques and tools; non-traditional method of risk transfer mode (ART); risk management information systems; risk management culture.Chapter VI, The empirical research on diversification performance and risk dispersion effect of Chinese insurance.Firstly,this paper applys Rumelt index to measure the degree of Chinese insurance diversification. Secondly, through calculating correlation between the scope index (R) and the return on total assets(E)to measure the degree of diversification impaction on the performance of insurance companies. Finally, through calculating correlation between the scope index (R) and the variations of E to examine the risk of dispersion effect.Chapter VII, The comparison of regulation between international diversified insurance companies. The insurance industry as the center, paper radiates the financial industry and comparatively analyses the supervision mode , the law system and supervision on financial holding companies between United Kingdom, Germany, the United States and China. From these ananlysises, we can find that more and more countries began to use unified supervision in order to improve the effectiveness of supervision on financial holding company and the financial Groups. However, due to the financial system, and very different political system, the financial supervision system must timely adjust the organizational structure ,the law system and the regulatory center according to the characteristics of financial development. Chapter VIII, The construction of the supervision and law system are adapted to the insurance diversification in china. This chapter analyses the challenges to supervision and legal system from diversification.Then the chapter proposes the measures which to improve the regulatory system and the legal system at present,as well as the supervision content about insurance holding company. According to the current situation of China's financial industry, a unified supervision framework should be established.This chapter puts forward to establish a centralized and multisectoral supervision system gradually,and makes forecast on law system.This paper has the following several aspects on innovation:Firstly, in the choice of subject and analysis in perspective. this paper proposes insurance diverisification which is a weak area in domestic insurance research,and defines insurance diverisification.In a word, the choice of subject and the study have important theoretical value and practical significance.The research not only further enriches the theory of diversification in China's insurance companies, but also provides a valuable guide to Chinese insurance diversification.Secondly, in Construction and analysis of theoretical system ,the paper defines the insurance diversification and comparatively analyses mixed management and comprehensive managemen.Then paper analyses the enterprise growth and evolution in diversified insurance companies,besides three main basic theories (scope economy thoery, portfolio theory and transaction costs theory).They are the theoretical supportment for Chinese insurance diversification.With the above theory,a research paradigm forms. The content analysis is not limited to a simple statement, not a replica of the existing analysis, this is different from the existing literature as a bright spot.Fourthly,in guiding the practice,the paper analyses the feasibility of Chinese insurance diversification,and discusses the patterns of Chinese insurance diversification.Further more, the paper analyses the special risks of insurance diversification,and points out that insurance holding company has system deficiencies and the supervion is indispensable.Then paper puts forward the frame and ideas of ERM and makes up the future supervision and law system.Fifthly,in empirical study,paper uses Rumelt Index and selects the larger part of the property insurance premium income or life insurance premium income as the main business revenue in each year,which distinguishes from some scholars selected all premium incomes.The deficiencies lie in these aspects , that diversification is a weak area in the national insurance study, less relevant studies, little direct information, so,there are some difficulties in research and exploration. Such as the empirical study, the sample data capacity is limited, the qualified sample is too few,and so on.It inevitably has some impaction on empirical results. Diversification pattern , risk management, external supervision are certain predictability in the strategic planning and study, the research on some issues should also be deepened and completed. This paper is wished to use the little to get the big( throw out a brick to attract a jade).