Empirical Research On The Effectiveness Of Insurance Company Governance

In 2017,with the insurance premium income reached 3,658.101 billion yuan,China becoming the world's second largest insurance country for the first time.In 2018,the premium income of 38,016.62 billion yuan continued our country to be in this position,but the insurance penetration and insurance density indicators show that China's insurance industry is large but not strong.In the background of the transition from a large insurance country to a strong insurance country,higher requirements are placed on the governance of insurance companies.In April 2018,China's newly established China Banking and Insurance Regulatory Commission first set up the Department of Corporate Governance Supervision to strengthen corporate governance supervision of financial institutions,providing a fundamental institutional guarantee for preventing the formation and accumulation of systemic financial risks.Based on the above-mentioned realistic background,this paper firstly reviews the existing literature in the field of insurance company governance evaluation and the insurance company governance effectiveness,finds that insurance companies and general companies both have three principal-agent problems.They include the issue of principal-agent between shareholders and managers,shareholders and shareholders,shareholders and creditors.However,due to the diversification of the insurance company's own business objectives,professionalization of business products,high debt structure of capital structure,uncertainty of results accounting,extensive business scope and strictness of government regulation,in insurance companies the principal-agent problem between the shareholders and creditors(policyholder)is more prominent.Therefore,this paper pays more attention to the issue of principal-agent between shareholders and creditors.We select the solvency margin,the proportion of connected transactions and the comprehensive cost rate to measure the agency costs generated by the three major agency problems.We use the 2016 insurance company governance evaluation index officially disclosed by the China Banking Regulatory Commission to reflect the quality of the insurance company's governance to investigate the impact of China's insurance company governance on the cost of the three principal agents.At the same time,in order to further analyze the effectiveness of China's insurance company governance,the paper makes an empirical exploration from the perspective of insurance company governance elements,and selects six major governance factors from the four dimensions including governance of shareholder,governance of director board,governance of the supervisory board and governance of executive to study the impact on agency costs.The research results based on the governance index show that the overall governance of insurance companies is invalid,but it can effectively solve the agency cost between the shareholders and creditors(insurers).Both the supervised governance index and the comprehensive governance index have an significant positive effect to insurance companies' core solvency and comprehensive solvency,which also can reduce the agency costs between shareholders and creditors(insurers)and thus effectively protect the interests of policyholders.The empirical results based on the governance factors show that both the governance of the executives and the governance of the supervisory board have a significant negative effect on the agency costs between shareholders and shareholders.Finally,this paper may provide some suggestions about how to improve the effectiveness of insurance companies in China based on the empirical conclusions of this paper.