Research On The Impact Of Product Diversification On Business Performance Of Life Insurance Companies

For life insurance companies,product diversification is a strategic decision guided by trends.On the one hand,changes in conceptual awareness and behavioral habits have led consumers to prefer high-quality and personalized goods and services in their product choices,and to prefer convenient sales channels in their purchasing methods.They will choose not only direct selling products,but also agency products,specialized economic representative products,and so on.On the other hand,China’s policies and regulations support life insurance companies to conduct business innovation,allowing them to operate other types of insurance besides ordinary life insurance,including dividend based life insurance,investment linked life insurance,universal life insurance,and expanding their coverage.Driven by market demand and policies,life insurance companies have also embarked on a diversified path in insurance design and sales channels,not only enriching insurance types,but also selecting multiple channel products for joint sales.However,whether product diversification can improve business performance has become a concern for the life insurance industry.This article first reviews the relevant domestic and foreign literature on the relationship between diversification and business performance,and finds that the relationship between diversification and business performance can be roughly divided into three types,namely,diversification premium,diversification discount,and the existence of a more complex relationship between the two,whether in general enterprises or in the insurance industry.After systematically explaining the relevant concepts of product diversification and business performance,it is pointed out that there are two types of product diversification in life insurance companies,one is product design diversification,and the other is channel product diversification.Then,it explains the relevant theories such as scope economy,risk diversification,and principal-agent theory.Subsequently,based on various data published in the "China Insurance Yearbook",this paper analyzes the development status of product diversification and business performance of life insurance companies in China,and explores the impact mechanism of product diversification on business performance of life insurance companies.In the empirical part,a panel model is constructed using the data of 62 life insurance companies from 2015 to 2020.Entropy index is used to measure the degree of product diversification of life insurance companies,and ROE is used to measure their operating performance.The results show that: first,there is a significant "U" shaped relationship between product design diversification and business performance of life insurance companies.Secondly,the relationship between channel product diversification and business performance of life insurance companies is not significant.Third,factors such as company size,establishment period,premium income growth rate,and organizational form also affect the operating performance of life insurance companies.Therefore,the suggestions are as follows: First,guide life insurance companies to seek diversified development strategies suitable for themselves;Second,support life insurance companies to develop channel products suitable for their main insurance types;Third,support life insurance companies to become large-scale and long-term enterprises;Fourth,deepen the business philosophy of life insurance companies focusing on efficiency;Fifth,encourage Chinese life insurance companies to learn from excellent management experience.