| The China Insurance market has experienced tremendous development in recent years .Ping An Insurance Company put out a new insurance product that is Investment-Linked Insurance in September23,1999. In this dissertation, the author will discuss on whether the Investment-Linked Insurance is fit for China according to the situation of our country ? What consequences dose this new product cause? This dissertation consists of five chapters:Chapter 1 of this paper is addressed to the development of Investment- Linked Insurance (ILI) and its significance. At the first place, the part 1 makes an analysis on the structure of insurance from the point of view of motivations for holding an insurance policy. We demonstrated that a typical life insurance policy consists of two kinds of factors, viz. security factors and investment factors, which indicate two different function of life insurance, viz. the security function and the investment function, respectively. Then, part 2 sheds light on the theoretical basis of ILI: in the long run, the consumer price level moves together with the price of stocks. Part 3 explains the causes leading to the invention of ILI, and its significance. The high inflation rate, the fluctuation of interest rate, the fierce competition between investment vehicles, the changes of demand and opportunities brought forth by information technology urged insurance companies to reinforce the investment factors in traditional life insurance, so as to make it same competitive as other financial vehicles. Chapter 2 discusses the design and the features of ILI products. The insurance of ILI is divided into two accounts, namely, the "ordinary account" and "independent account". In the ordinary account, fund is handled in traditional means, so as to guarantee the basic security obligation to customers.In independent account there are several portfolio, each of which consists of several equivalent fund units. A customer is permitted to decide the distribution of insurance across portfolios; the loss and earnings from portfolios are recorded on his account, which ultimately determined the payment he will get in the future. The part 2 compares the ILI with traditional insurance, describes 5 features of ILI: (1) Investors choose the investment vehicles and bear the risk. (2) Independent account. (3). Diversification of investment vehicles which is based on the same principles as mutual fund. (4)Open information and transparency. (5) Cash value and insurance indemnity depend on the investment result of independent account.Chapter 3 " the overseas development of ILI" makes comparison between United States and Japan as regard to the background of the ILI's advent, the variety of ILI products, the government supervision and the tax policies, etc.. It also includes an analysis of the reasons that lead to variable life insurance 's failure in Japan. We believe that the macroeconomic fluctuation is only an evocative factor to the unstablty of variable life insurance, the more basic reason is that the improper marketing operation harm the product's reputation and damp the confidence of customers in the long run. As overseas experience shows, the development of ILI needs some prerequisites: 1.there are great magnitude of solvent customers with investment idea; 2, favorable macroeconomic conditions; 3. the support of a mature capital market; 4. insurance companies must have good investment skills, appropriate management and capable personnel; 5. ILI's practice demands particular government supervision.Chapter 4 " ILI in China and constraints on its development" is the core of this paper. Start with the history of ILI's development in China, we discuss the background of ILI's advent in China, make out the applicability and the status quo of ILI's development, and analyze in full detail the constraints on its development in China. Deflation, low earning-asset ratio and great lossfrom interest spread corner Chinese insurance industry in to solvency crisis; on the other hand, in face of competit... |
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