An Empirical Study On Commercial Auto Insurance Pricing Mechanism Reform

Implementing market-oriented property insurance rate is an inexorable trend around the globe. The first reform of implementing market-oriented auto insurance rate, starting from 2000 to 2006, proved to be a failure. Currently auto car insurance products still use regulated rate subject to strict administrative approval. Homogenized auto product rates can neither assure fairness between different risk bodies, nor meet different market demands. Searching the route of auto insurance rate marketization and successfully implementing it is one of our principal reform tasks now. Our regulators are seeking for a new marketization way in auto insurance. China insurance regulatory commission promulgated on 8th march,2012 the "Notice about the Enhancement of Rate Regulation of Commercial Motor Vehicle Insurance"(hereafter we refer to "The Notice" for short). Shortly thereafter, China Insurance Association promulgated "Motor vehicle insurance business model clauses" on 14th March. Both of these indicates the reform of commercial auto insurance pricing mechanism is about to begin. We need to consider some questions like:whether "The Notice" can meet the market requirements? Whether now is an appropriate time to initiate such a reform? How does the market players see of "The Notice". This paper will answer such questions from a empirical study perspective.Chapter 1 is a preface. In Chapter 1 we briefly introduced our study subject and the purpose of doing this study. We also generalized currently related domestic literatures. Analysis framework, methods of study, pros and cons of our analysis are also presented in this chapter.In Chapter 2 we discuss our data in detail. We introduce different data sources and an array of criteria to selecting and filtering the raw data. We describe detailed process of questionnaire investigation and the methodology we adopt to process and analyze the data.Chapter three is about the status quo of the commercial auto insurance pricing mechanism. From a chronological perspective, we describe the commercial auto insurance pricing mechanism reform in our country. Then we introduce the status quo of the commercial auto insurance pricing mechanism.Chapter four is about the existing problems of the current pricing mechanism. Our current pricing mechanism has three main problems:auto insurance product and its pricing, market trades, regulatory measures and behaviors. We argue one of the main causes to these problems is our currently insufficient auto insurance pricing mechanism. So to resolve the issue we need to probe into the ways to complete auto insurance pricing mechanism.Chapter five is about analysis to the investigation results of "The Notice". The conclusions are as follows:(a)most of the respondents support "The Notice" reform approach and agree "The Notice" conforms to the intrinsic requirement of the market;(b)the policies conforms’to the level of the auto insurance market;(c)most of the respondents are worried about the expected results and policies;(d)and the respondents have different views regarding the time of reform.Chapter six is about the future orientation of auto insurance pricing mechanism and some advices. In brief,the author comes to the following conclusion. Firstly,the future orientation of auto insurance pricing mechanism is to implement rate marketization under necessary regulation. Secondly "The Notice" reform approach is consistent with the future orientation of pricing mechanism. Thirdly, the market entities don’t have enough confidence about this reform, and they don’t believe the regulator’s policies and capacity. Forth, our reform strategies should supplement two points:(a)the consumers should join this reform;(b)on the general guidelines of the "The Notice", allow some cities to explore the difference reform approach.