Insurance Market, Adverse Selection Risk Of Theoretical Analysis And Empirical Research

It is well known that the existence of adverse selection will not only inhibit the insurance demand but will also lead to low efficiency and quality in the insurance market. Therefore, the insurance mechanism can not effectively play its role in spreading risk and it is not conducive to the healthy development of the insurance industry.On the basis of the theory of insurance economics, risk management and insurance and game theory and information economics, we analyzed the risk of adverse selection in insurance market, using the balance analysis in economics and the models in game theory and information as the basic model analysis tools. Our aim is to reveal the inherent characteristics and laws of adverse selection and establish an theoretical framework in the analysis of adverse selection risk management.Firstly, we analyzed the risk of the adverse selection in insurance market, explaining the definition, reason, phenomenon of the adverse selection and its influence on the insurance market. Secondly, we analyzed the equilibrium in the insurance market and the conditions with adverse selection. On the basis of the models of Rothschild and Stiglitz, we built up an index ASI to measure the degree of adverse selection and took the social endowment insurance of the North District of Qingdao as an example in verifying the existence of adverse selection and the extent of the increase in loss claims. The research shows that, although the social endowment insurance can inhibit the role of the risk of adverse selection, which means that the existence of adverse selection encourages the existence of social insurance, there is an obvious defect in China's current social endowment insurance system, therefore, it greatly weakened the social insurance to inhibit the risk of adverse selection and there is serious adverse selection risk in China's social pension insurance. Finally, we raised solutions to the adverse selection from the optimal design of insurance contract and a general sense of risk prevention strategy.