Information Asymmetry In Social Insurance

Information asymmetry is widely seen as an important research object of mainstream economics, since contract theory has developed at a rapid pace in the last 3 decades. The adverse selection caused by information asymmetry makes the market which was trusted as a critical regulatory mechanism fail, resulting in market inefficiency. Insurance market, due to its special structure, has always been considered as an example of information asymmetry, thus becoming the first choice for the empirical study of it. Several conclusions are made by literature that is information asymmetry leads to adverse selection, adverse selection can be tested by regression of protection level and risk of loss, the test model can be transfer to other situations.In this paper, we apply these classic models into the study of information asymmetry in social insurance and confirmed that the adverse selection is significant in URBMI. Adverse selection phenomenon doesn’t exist in compulsory insurance as social insurance is. But URBMI is special. Contrary to other social insurance, the principle of voluntary participation makes URBMI exposure to the risk of adverse selection caused by information asymmetry as commercial insurance dose. On the other hand, the basic medical insurance for urban residents is essentially provided by the state and society, which is essentially different from commercial insurance. The URBMI adopt a uniform rate of premium and deductible. That makes the coverage independent of the observable risk characteristics of the insured. These two special properties enable us to adopt the empirical model mentioned above to inspect adverse selection factors in URBMI under asymmetric information situation, while require reflecting the unique characteristics of social insurance.Factorial analysis and logistic regression technologies are used in the empirically study. And according to the results of empirically study, we hereby draw our conclusions:· Adverse selection caused by information asymmetry is significantly existed in URBMI. And it’s even more severe in URBMI than in the commercial insurance.· The characteristics of social security such as preferential policy, high welfare, etc. are to a digree neutralized the adverse selection phenomenon in URBMI. Supported by the results of empirically study, this thesis proposed four policy recommendations:· Expand the coverage and inhence the benefit level of URBMI· Improve the Community Health Service System and guide inured to choose community hospitals as their fist option.· Reform the payment methods of medical insurance and regulate the therapeutic behavior of medical institutions.· Set the waiting period for newly insured.