Research On Environmental Pollution Insurance Model

It seems certain that the rapid economic development is unavoidably accompanied by frequent environmental pollution accidents. In order to protect the rights of the victims and reduce the enterprise risk, the environmental pollution liability insurance is carried out in many countries around the world. But whether this system can be successfully implemented largely depends on its implementation patterns. This important measure of social relief, if not appropriately implemented in the right pattern, will not be of much help to social benefit. It is the key step in establishing the environmental pollution liability insurance system to choose the right pattern, which is very significant for putting the insurance system into function.The first chapter introduces the concept and functions of environmental damage liability insurance mode and the great influence it has on the functioning and formation of the system as well as its profound meaning for the development of insurance industry. The paper then introduces several different types of modes, focusing on the mandatory mode and voluntary mode. The mandatory mode is protected by the enforcement of law, the voluntary mode is based on the freedom of contract. The establishing conditions of the two modes are both influenced by market environment, laws and regulations and government policy and etc. The mandatory mode is more favorable when the market is considered good with the fast development of macro economy, the profitability of the enterprises, good acceptance of enterprises and insurances and the existence of a mature insurance market., and when the complete and well-made laws and regulations provide legal support, and when the government makes preferential policies in terms of tax and subsidies for enterprises and insurance industries and imposes strict punishment on enterprises in dealing with environmental pollution accidents. Other wise the voluntary mode is more recommended.The second chapter makes a comparison of mandatory mode and voluntary mode and introduces several modes used in major western developed countries. The compulsory mode, because of its strong positive externality, can well protect the rights of the victim, which is one of its big advantages. It also solves the problem of adverse selection in insurance market. The asymmetry of information causes the inferior position of insurer in the insurance relationship, so the high-risk enterprises are willing to insure and the low-risk enterprises are not. The adverse selection problem will make a bad effect on the running of insurance companies. The compulsory mode leaves enterprises no autonomy and thus resolves this problem. Under this mode there will no longer be the lack of demand and weakness of supply and the insurance fee will stay a low level. On the other hand, under the voluntary mode the enterprises and insurance companies have greater autonomy, both sides can choose to insure and accept insurance or not, in which condition the mode will be implemented more smoothly. The cost is relatively small in terms of systematic design saving man and material resources. If the mandatory mode is singly carried out, it will lead to moral crisis, e.g. the enterprises might ignore the environmental pollution accidents. If the voluntary mode is singly imposed, it is unfavorable to protection of the victims. Different modes are adopted by different western developed countries. The United States mode is a compulsory one, developing on the foundation of complete legal system and mature market conditions. The German mode is a combination of mandatory liability insurance and financial guaranty. France takes a voluntary mode as a whole.The third chapter introduces the status quo of China`s environmental damage liability insurance which has always been under the guidance of “mostly voluntary mode with compulsory mode in support”. Nowadays there are many cases of zero insurance payment in China, which suggests that this kind of mode is not suitable for China`s reality. The reason are that despite the good development in market economy conditions, most parties involved do not have enough self-consciousness, the enterprises would rather take chances than take out an insurance while the insurance companies are unwilling neither to cover the risk nor to invent new products in this area, making the voluntary mode stuck in its development in China. The basic laws on environmental protection are not specific enough to support the mandatory mode. China is developing dramatically in its economy and the insurance market is gaining its maturity. However the self-consciousness of enterprises is low. This leads to a strong call for a new pattern relying on mandatory mode which only needs more support from government polices in terms of tax and compensations and sound and complete legal system. Nevertheless for a minority of remote and impoverished regions as well as the low-polluted industries the voluntary mode is still encouraged. Only by this way can the environmental damage liability insurance system work its function of social relief, protect the legitimate right of the victims, disperse the management risk of the enterprise and promote the coordinated development of economy and environment.