The Study On Differential Pricing Strategy Of Chinese Urban And Rural Commercial Insurance

During the development in more than 30 years, our insurance industry has made remarkable achievements. On the one hand, the total size of the insurance has maintained rapid growth. On the other hand, the level of the insurance market has increased gradually. However, we must see there are unreasonable insurance market structure issues when Chinese insurance industry grows rapidly. And structural problems have been the main constraint at the stage of our insurance industry's development. Particularly, the imbalance of the insurance development in rural and urban is an important aspect of the current structural contradiction, which has a negative impact on Chinese sustained and healthy development. In addition, as Chinese national economy goes from a planned economy to a socialist market economy, our insurance industry has come to the marketability gradually. While, the important part of the insurance market reform is premium rate market, which is to be considered the influence of market supply-demand relation when determining the premium rate. In view of our actuarial pricing is only from the unilateral perspective of insurance companies'supplies, ignoring the market demand factors. Therefore, we should make appropriate adjustments in pricing of insurance products, combing with the characteristics of market demand. Summing described two aspects, price Chinese urban and rural commercial insurance products differently not only can reduce the gap between the insurance industry in urban and rural areas, but also can promote our insurance industry's market-oriented process. This paper's differential pricing of urban and rural commercial insurance is mainly based on different demand patterns in urban and rural insurance market. Compressed the margins appropriately and low the price in rural market which has the greater elasticity of demand, improve service and premiums in city market which has the smaller elasticity of demand, which is beneficial to taping the potential of insurance needs in rural area, improving the level of insurance services for urban residents, increasing the profits of insurance companies, balancing the development of Chinese insurance industry. This article which is based on actuarial pricing theory reveals the decisive role of insurance price changes to the underwriting profits and the deficiency of actuarial pricing in market demand, laying a theoretical foundation for differential pricing of urban and rural commercial insurance. Then, the article makes a quantitative and qualitative analysis about the data of urban and rural insurance market on the last two decades, sums up the specific differences of market size, development level and process in Chinese urban and rural insurance market. According to the differences, the article analyses economic, social, demographic and cultural values and other factors in detail, evaluates the affecting direction and intensity of the significant factors by econometric models. Aiming at the different needs in urban and rural insurance market, differential pricing theory in the economics provide a reference for the premium rate marketability, which demands different prices in accordance with the purchaser's price elasticity. Finally, in addition to prevent the possible risks effectively, differential pricing of urban and rural commercial insurance still needs the micro self-discipline of insurance companies, the concept of coordination of the insurance industry associations, the macro-control of CIRC and the fiscal support of our country to help it to implement smoothly.This article is divided into five parts:The first part describes the background and significance of the topics, domestic and international literature review, research ideas, structure arrangement and lack of innovation of this article.The second part as the theory pilot studies the bargaining space which insurers and the insured can be coordinated in the prices of insurance products and describes the basic principles and guidelines that differential pricing should follow. By addressing the influencing factors to pricing the insurance product, the article reveals that actuarial pricing theory is short of market demand, provides the differential pricing theory considering the relationship between market supply and demand to improve product pricing. The third part makes the operating data of urban and rural insurance market for the sample, analyses the differences between urban and rural insurance market by quantitative and qualitative methods, especially the differences in elasticity of demand that is affected by the economic conditions, which makes a preparation for studying the use of differential pricing in our urban and rural commercial insurance market.The fourth part guided by the differential pricing in microeconomic theory analyses the practical and theoretical conditions of the differential pricing of urban and rural commercial insurance. Finally, it proposes that insurance companies can charge a higher premium price against urban residents who are not sensitive to it and charge a lower premium price against famers who are sensitive to it.The fifth part firstly analyzes the possible risks which occur in the process of differential pricing, then provides a series of countermeasures including risk prevention.