The Analysis On The Efficiency Of Market Discipline In China's Insurance Market

Once again,the concept of Market Discipline has attracted scholars' attention because of the "three pillars" framework determined by "Basel II".Because "Basel II" first listed the Minimum Capital Requirement,Supervision and Inspection of supervision institutions and Market Discipline as the three pillars of banking supervision,it is believed that the Market Discipline belong to the professional terms of banking supervision,and only limited to the research in the field of banking.Therefore,scholars at home and abroad have made a lot of research results on banking Market Discipline,while the research results in the field of insurance are very few.This paper holds that Market Discipline can also be applied to the field of insurance.For "the Solvency II" and "the C-ROSS" are the most advanced insurance solvency supervision systems in the world,so it is enough to explain that they regard Market Discipline as one of the three pillars of insurance solvency supervision.Taking "the C-ROSS" as an example,the third pillar of its establishment-Market Discipline,mainly includes two contents: First,it requires that insurance companies should be constrained by means of external information disclosure,making full use of market forces other than government regulators.Second,the government regulatory agencies are required to improve the Market Discipline mechanism,optimize the market environment,and promote market forces to better play the role of discipline on risk management and value assessment of insurance companies.It can be seen that government regulators have noticed that market forces other than government regulators can restrain insurance companies,and that government regulators can effectively promote market forces to play a better role by improving the market restraint mechanism.This makes the study of Market Discipline in the field of insurance has obvious practical significance.The study of insurance Market Discipline involves a wide range of issues,but no matter which angle you study on the issue of insurance Market Discipline,you can't avoid the test of the effectiveness of Market Discipline,otherwise the study of insurance Market Discipline can't be implemented.Taking the research on the effectiveness of insurance Market Discipline as the main line,and then focusing on this main line to carry out research on other related issues of insurance Market Discipline,there will be no problem of research center deviation,which is also the reason why this paper directly focuses on the "The Analysis on the Efficiency of Market Discipline in China's Insurance Market".In this paper,the effectiveness of insurance Market Discipline as a starting point,then use the normative analysis and the empirical analysis methods on studying insurance Market Discipline for a systematic and comprehensive analysis.The basic idea of this paper is to carry out theoretical research on "what is the discipline of the insurance market" at first,and then deeply analyze the current realistic environment of the discipline of the insurance market in china,and then carry out an empirical study on the "effectiveness" of the discipline of the insurance market from the perspective of consumer Market Discipline,so as to answer the "how" question of the current situation of the discipline of the insurance market,then finally on the government regulatory agencies "how" to improve the effectiveness of insurance Market Discipline provides policy recommendations.The paper is divided into five parts,including the introduction,the chapter one,the chapter two,the chapter three,the chapter four,the chapter five and the chapter six,as well as research conclusions and policy recommendations.The detailed content of this paper is as follows:The first part is the introduction.First of all,this paper expounds the background and significance of this topic,defines the research scope and related concepts,then combs and reviews the relevant literature of Market Discipline research,introduces the main content and research methods of this paper,and finally points out the possible innovations and shortcomings of this paper.The second part is the theoretical analysis of insurance Market Discipline,including the chapter one and the chapter two.The main content of the first chapter is to study the basic theory of insurance Market Discipline.First of all,this paper introduces the theoretical basis of Market Discipline by combing the evolution of the dispute between "Free Market" and "State Intervention" in western economics,and then makes a systematic study on the connotation of insurance Market Discipline,including the definition,the classification,the effectiveness and the influencing factors of insurance Market Discipline.Finally,it studies the relationship between the Market Discipline and the Government Supervision as well as the relationship between the Market Discipline and the Internal Control of the company.The main content of the second chapter is to study the operation of insurance Market Discipline and the mathematical derivation of the optimal level of Market Discipline.Firstly,it points out that the effective operation of insurance Market Discipline includes two stages: the Market Supervision and the Market Influence.Secondly,it analyzes the key links of these two stages and designs the operation track of insurance Market Discipline.Then,the optimal level of Market Discipline is deduced by mathematical method,and the relationship between the level of Market Discipline and the externality value of insurance companies,the probability of business failure,the operating efficiency,the Market Discipline cost of stakeholders and social efficiency is analyzed.The third part is the analysis of the realistic environment of the insurance Market Discipline in our country.The third chapter analyzes the basic environment of insurance Market Discipline from three aspects: the development of the insurance market,the insurance supervision of our government and the internal control of insurance companies,which provides a practical basis for the study of the effectiveness of insurance Market Discipline.Through the analysis of the current situation of the insurance market,it is found that although the insurance market in china is huge and growing rapidly,but it is not strong.China's insurance depth and insurance density rank lower in the world,and it is also found that there is an obvious imbalance between supply and demand in china's insurance market.Through the analysis of the insurance regulatory practice of our government,especially the implementation of "the C-ROSS" regulatory system,we can find that the government regulators pay attention to the market forces.The gradual improvement of the insurance information disclosure system and the steady progress of the market-oriented reform of the insurance premium rate provide a better basis for the implementation of the insurance Market Discipline.Through the analysis of the internal control construction of insurance companies,it is found that although the internal control construction of insurance companies in China has made great progress,but the level of internal control still needs to be further improved.The fourth part is an empirical study on the effectiveness of direct and indirect Market Discipline.Including the chapter four,the chapter five and the chapter six.The fourth and fifth chapters are about the effectiveness of consumer Direct Market Discipline,and the sixth chapter is about the effectiveness of consumer indirect Market Discipline.The fourth chapter is an empirical study on the existence of the consumer direct Market Discipline in "Market Supervision" stage.According to the basic theory of Market Discipline,consumers will take Price Discipline and Quantity Discipline on high-risk insurance companies based on their own interests.Therefore,the fourth chapter conducts empirical research from the perspective of whether consumers will adjust their consumption behavior based on the high-risk taking of insurance companies to test the existence of the "Market Supervision" stage.The idea of empirical research is to test whether there are Price Discipline and Quantity Discipline exist for different types of insurance companies in China,and then classify the insurance companies according to their capital attributes to further analyze the differences of consumer behavior adjustment for high-risk taking of chinese and foreign companies.The fifth chapter is an empirical study on the effectiveness of the "Market Influence" mechanism of consumer direct Market Discipline.The stage of "Market Influence" is the second stage of market restraint.According to the basic theory of Market Discipline,if the restraint signals generated by insurance companies in the stage of "Market Supervision" reduce the risk-taking of the company,then the mechanism of "Market Influence" of consumers' direct Market Discipline is effective.Therefore,to test whether the "Market Influence" mechanism is effective can be verified by whether the direct Market Discipline of consumers have an influence on the risk-taking of insurance companies.The idea of empirical research is to test the influence of consumers' direct Market Discipline on the risk-taking of different types of insurance companies,then classify insurance companies according to their capital attributes,and further analyze the influence of consumers' direct Market Discipline on the risk-taking of chinese and foreign companies.The sixth chapter is an empirical study on the effectiveness of indirect Market Discipline from the perspective of consumer complaints.Consumers' complaints are different from the Price Discipline and the Quantity Discipline in the chapter four.The Price Discipline and the Quantity Discipline of consumers can be directly reflected in the operating data of insurance companies,but consumers' complaints are more likely to have some influence on insurance companies with the help of other forces.Therefore,this paper holds that consumer complaints are a means of expression of indirect Market Discipline.Because the main channel of consumer complaints is through the government regulators or the China Insurance Industry Association,and the final handling results of complaints are closely related to the continuous attention of the government regulators or the China Insurance Industry Association,so in the empirical design of the chapter 6,this paper considers the synergistic effect of the consumers' complaints and the Government Supervision.The idea of empirical research is to test the influence of consumer complaints on the risk-taking of different types of insurance companies,then classify insurance companies according to their capital attributes,and further analyze the influence of consumer complaints on the risk-taking of chinese and foreign companies.The fifth part is the conclusion and the policy recommendations.The main content of this paper is to summarize the conclusions of this study,and put forward two policy suggestions on how to improve the effectiveness of consumer Market Discipline by government regulators: First,to suggest that government regulators create better basic conditions for consumer Market Discipline;Second,to suggest that government regulators actively guide insurance companies to attach importance to consumer Market Discipline.Through the discussion of the full text,this paper draws the following two conclusions:First,the direct Market Discipline of consumers is invalid.There are two reasons for the ineffectiveness of consumer direct Market Discipline: on the one hand,the "Market Supervision" stage of the consumer direct Market Discipline does not exist completely.For the different types of insurance companies and insurance companies with different capital attributes,the "Market Supervision" stage exists differently.Specifically reflected as follows:(1)For the chinese and foreign property insurance companies,there is a significant positive correlation between the change of their risk-taking in the previous year and the growth rate of premium income in this year.Therefore,there is a "Market Supervision" stage exists in the Comprehensive Market Discipline of consumers.However,there are differences in the Price Discipline of consumers.There is a significant negative correlation between the change of risk-taking and cost expenditure of chinese property insurance companies in the last year.Therefore,there is a "Market Supervision" stage exists in the Price Discipline of chinese property insurance companies,while there is no "Market Supervision" stage exists in the Price Discipline of foreign property insurance companies.(2)For the chinese and foreign Personal Insurance Companies,there is no "Market Supervision" stage exists in the Comprehensive Market Discipline and Quantity Discipline of consumers.However,the Price Discipline of consumers is different from this.There is a significant negative correlation between the change of risk-taking and cost expenditure of chinese and foreign personal insurance companies in the last year.Therefore,there is a "Market Supervision" stage exists in the Price Discipline of consumers on chinese and foreign personal insurance companies.On the other hand,the direct market restriction of consumers does not have the effect of "Market Influence".Specifically reflected in:(1)For the financial risk-taking of insurance companies,the Comprehensive Market Discipline and Price Discipline of consumers have no "Market Influence" stage on chinese and foreign property insurance companies and chinese and foreign personal insurance companies.(2)As for the risk-taking of property insurance companies,the Comprehensive Market Discipline and Price Discipline of consumers have no "Market Influence" stage on both chinese and foreign property insurance companies.(3)For the risk taking of life insurance companies,the Comprehensive Market Discipline and Price Discipline of consumers have no "Market Influence" stage on both chinese and foreign life insurance companies.Second,with the intervention of government regulators,consumers' indirect Market Discipline are partially effective.Specifically reflected in:(1)For the financial risk-taking of insurance companies,with the intervention of government regulators,there is a significant positive correlation between the change in the number of complaints from consumers in the previous year and the financial risk-taking of chinese property insurance companies.Therefore,the indirect Market Discipline of consumers have a "Market Influence" stage on chinese property insurance companies,but on foreign property insurance companies and chinese and foreign investors none of the insurance companies had the "Market Influence" effect.(2)With the intervention of government regulators,there is a significant negative correlation between the change of consumers' complaints in the previous year and the risk-taking of chinese property insurance companies in this year's claims.Therefore,the indirect Market Discipline of consumers have the "Market Influence" stage on chinese property insurance companies,but not on foreign property insurance companies "Market Influence" role.(3)With the intervention of government regulators,there is a negative correlation between the change of consumers' complaints in the last year and the risk-taking of chinese and foreign personal insurance companies.Therefore,the indirect Market Discipline of consumers have a "Market Influence" stage on both chinese and foreign personal insurance companies.Compared with the previous research,the innovation of this paper mainly includes the following three aspects:1.Research topic innovation.At present,there are a lot of research literature on the Market Discipline of banks,but systematic and comprehensive research results on the insurance Market Discipline are rare.Therefore,this paper takes this as the topic,which is conducive to promoting the research in this field.2.There is innovation in the selection of indicators.Taking the number of consumer complaints as the measurement index of consumer indirect market constraints is in line with the objective practice,practical and helpful to increase the persuasive power of the research conclusion.3.The research scope of Market Discipline has been expanded.The existing literature mostly tests the existence of the Market Supervision stage of Market Discipline,and then determines whether consumers have Market Discipline.This paper argues that the existence of "Market Supervision" stage alone does not prove that consumers have effective Market Discipline.The key to the effective operation of Market Discipline lies not only in "Market Supervision" stage,but also in its "Market Influence" stage.Only when "Market Supervision" stage and "Market Influence" stage both exist,can they be called effective Market Discipline.Therefore,this paper not only empirically tests the existence of the "Market Supervision" stage,but also empirically tests the effectiveness of the "Market Influence" mechanism.From the two stages of "Market Supervision" and "Market Influence",this paper analyzes the Market Influence of consumers and expands the research scope of Market Influence.However,due to the limitation of capacity and space,as well as the restriction of data availability,this paper only looks for evidence from the aspect of consumers,which is far from the deeper and more comprehensive research goal,which also constitutes the author's follow-up research direction.