Analysis Of The Impact Of Reputation Risk On The Performance Of Insurance Companies

As one of the mechanisms to protect risks,insurance not only undertakes to manage personal and property risks for customers,but also faces various and complex risk situations such as market risks,business risks,and credit risks.The insurance industry is based on trust,and a good reputation is the foundation of its survival.On 18 February 2021,the China Banking and Insurance Regulatory Commission(CBIRC)issued new regulations on the Measures for Reputation Risk Management of Banking and Insurance Institutions(for Trial Implementation),aiming to improve the reputation risk management level of banking and insurance institutions and maintain the stability of the financial market.Due to the complexity and difficulty of measuring reputational risk,there are many difficulties in how to effectively define and manage reputational risk.Therefore,studying the impact of reputation risk management of Chinese insurance companies on business performance is of practical need and great significance,which can better prevent the occurrence of risk accidents,reduce losses as much as possible,and promote the good and rapid high-quality development of the insurance industry.This paper collects the panel data of 127 insurance companies from 2010～2021,based on Harris-Fombrun’s reputation index system,T.Munoz and S.Kumar’s brand evaluation method as the framework,and selects appropriate variables with reference to the "Insurance Company Legal Entity Operation Evaluation Index" designated by the former Insurance Regulatory Commission,and systematically identifies the influencing factors of reputation risk.Considering the construction of the "second-generation compensation system",the data was analyzed during 2016～2021,and the reputation index of each insurance company was calculated by principal component analysis as an explanatory variable,and the impact of reputation index on the performance of insurance companies was empirically analyzed by panel regression model.The empirical results show that:(1)for each unit with a higher reputation index score evaluated by 12 indicators of perception,finance and behavior,the ROA of the company’s total assets can be increased by 3.1%;The reputation index of insurance companies showed a significant positive correlation with the coverage of net profit compensation expenditure and the capital preservation and appreciation rate of capital,which were 40.1%and 60.9%respectively.That is,the higher the reputation index,the lower the bankruptcy risk of the company,and the higher the operating efficiency and security of the company’s capital.(2)There are differences in the impact of insurance company reputation indices of different attributes and nature on corporate performance.According to the underwriting business,the reputation index of life insurance companies has a more significant impact on the business performance of insurance companies than that of property insurance companies.According to the capital composition,the reputation index of Chinese insurance companies has a more significant impact on the business performance of insurance companies than insurance companies with foreign capital injection.After further analysis,on the one hand,it is found that there is a threshold effect on the relationship between the reputation risk of insurance companies and corporate performance,including reputation index,solvency adequacy ratio and company size.On the other hand,examining the effect,it is found that the reputation risk of insurance companies acts on corporate performance through brand effect.In addition,the impact of the reputation index of insurance companies from 2010 to 2015 on business performance before the implementation of the "second generation" system was further analyzed.Therefore,for the subsequent reputational risk management of the insurance market,the CBIRC and the insurance company should work together.Each insurance company should:clarify its main position in reputation risk management,and further strengthen the identification and evaluation of reputation risk;Pay attention to strengthening the construction of its own brand,establish a good brand image of the insurance company,and then improve the overall image of the insurance industry.The insurance supervision department should:continue to do a good job in supervision,management and guidance.Deepen the classified supervision of insurance companies,refine the requirements for comprehensive risk management,and emphasize reputation risk management;We will guide insurance companies to improve their ability to cope with various risks and effectively assume huge social responsibilities.