Validity Evaluation of the Commercial Endowment Insurance Market in China〔* 〕

Zhao Yi

(School of Economics and Management Southwest Petroleum University，Chengdu Sichuan 610500)

Ⅰ．Introduction

According to the standards of the United Nations，a country whose senior citizens over 60 account for the 10%of the total population，or the senior citizens over 65 account for over 7%of the total can be referred to as an aging country．By the end of 2013，the population aged 60 and above in China account for 14．9%of the total，and the population aged 65 and above account for 9．7%of the total，which means that China has become an aging country．A series of population and social economic problems brought up by aging population have presented huge challenges and pressure for the social security system with the main body of endowment insurance．

Social basic endowment insurance，enterprise supplementary pension insurance and commercialpension insurance constitute the three pillars of national endowment insurance security system．The national endowment pressure is increasing with China’s entering the aging country．But real statistics have shown that a large quantity of labor cannot fully realize their endowment need by basic endowment insurance，nor can they enter the corporation pension plan．At this time，we should strive to develop commercial endowment insurance to relieve the pressure of endowment insurance security system so as to relieve the governmental financial pressure，improve the social security standard and people’s living conditions．

Through the connection of quantitative analysis，qualitative analysis，empirical study and normative study，as well as data collection and analysis of the state of supply and demand of the commercial endowment insurance market in China，this paper analyzes the factors that influence the effective demand and effective supply of the commercial endowment insurance in China，makes further analysis of the total amount and structure，and finally draws the conclusion on and puts forward advice about the effective development of the commercial endowment insurance market in China．

Ⅱ．Literature review

There is little research on the effectiveness of commercial endowment insurance market，some of which just mention the effective demand of endowment insurance market or point out the influence factors and calculation methods of effective demand，offering some thoughts on the validity evaluation of endowment insurance market．American economist Fischer(1973)gives a life insurance demand function by taking the example of fixed－term insurance．He holds that life insurance demand has something to do with death rate，bequest motive and future expected income．Canadian economist Lewis(1989)thinks that the purchase of life insurance has something to do with the amount of heritage．Chu Junhong(1998)points out that life insurance premium is the reasonable balance of the demand of endowment insurance，and that the direct variables include the price of life insurance and income，while indirect variables include financial policies，income polices and social security system．Zhao Chen(2009)makes a theoretical analysis of the effective demand of life insurance in China，and establishes simple linear model to conduct empirical analysis．

Ⅲ．Analysis of the demand of the commercial endowment insurance market in the context of aging of population

First，the increase of aging population has directly increased the demand of commercial endowment insurance．The population of aging population over 65 will be tripled，and as a result，the insufficient commercial endowment needs to be improved to satisfy the endowment requirement of the aging population．

Second，the increase of average life expectancy has indirectly increased the demand of commercial endowment insurance by strengthening the self－support by aged．

Third，the increase of population feed rates contributes to the increasing pressure of social endowment，which makes the nation to boost the development of commercial endowment insurance and indirectly increases the demand of commercial endowment insurance．

The increase of urban household average per capita disposable income and rural per capita net income has made it possible that people can afford the commercial endowment insurance products．The improvement of living conditions will undoubtedly encourages more people to keep or improve the value of their assets by various channels．And purchasing commercial endowment insurance is one of the options．

What’s more，despite that the increasing income may not be used to purchase commercial endowment insurance，the increase of residents income has undoubtedly provided material foundation for the increase of the demand of commercial endowment insurance market．On the premise of increasing income，people’s insurance consciousness has been strengthened，which contributes to the increase of the demand of commercial endowment insurance market．

Ⅳ．Analysis of the supply of the commercial endowment insurance market in the context of aging of population

The supply of the commercial endowment insurance market under discussion mainly refers to the supply of commercial life insurance(annuity)．

The development of life insurance market can be attributed to many factors．First，the increase of financial organizations has contributed to the orderly competition among the main bodies of various commercial endowment insurance products．Besides market competition，the suppliers of various commercial insurance products adopt coordinated mechanism and sharpen their edges by exerting the advantages of respective technology and management．Second，mixed operation has improved the cooperation between insurance companies and other financial organizations．Stable cooperation relations have been established by building common interests mechanism in order to increase the supply of commercial endowment insurance．Third，the innovation of financial products has given rise to more commercial endowment products to satisfy clients’need．

Ⅴ．Efficiency evaluation of the commercial endowment insurance market in China

The operation of commercial endowment insurance market is just like other commodity market，which should be supported by the theory of demand and supply．

1．Definition of efficiency

Paul A．Samuelson(1965)and Benoit Mandelbrot(1966)raise the famous Efficient Market Hypothesis，and they hold that if market is effective，then the disclosure information of capital will be instantly reflected in prices．Efficient Market Hypothesis has become well－known with the publication of the Effective Capital Market written by Professor Eugene Fama in 1970．Fama divides the market efficiency into weak efficiency，semi－strong－efficiency and strong efficiency according to information set．

2．Efficient demand of the commercial endowment insurance market in China

The theoretical analysis of the efficient demand of commercial endowment insurance market in China:

The efficient demand of commercial endowment insurance has the following characteristics:comparatively strong income elasticity and comparatively weak price elasticity;having nothing to do with the natural death rate of the insured;having a lot to do with the consumption concepts of the policyholders．

3．Analysis of the balance between supply and demand of the commercial endowment insurance market in China

(1)The gloss balance between supply and demand of the commercial endowment insurance market

Statistics show that according to the current growth rate，the endowment insurance market in China will still in the state of short supply．The supply should be increased to meet the growing demand of market．

(2)The structural balance of the commercial endowment insurance market

We should focus on the suppliers and products demand of commercial endowment insurance．The amount of the suppliers of commercial endowment insurance products has met the demand of products．The decrease of concentration ratio of commercial endowment insurance market will help to satisfy the demand of more customers．The lack of specialization on the part of the suppliers of commercial endowment insurance products is the major reason accounting for imbalance between supply and demand．

Ⅵ．Conclusion

Despite of the great development of domestic commercial endowment insurance market during recent years，the market validity has remained low in terms of total sum and structure，thus failing to meet the increasing insurance demand and hindering the sustainable development of market．Some measures need to be taken to boost the sound development of domestic commercial endowment insurance market．

Insurance companies must strive to improve the specialization level in terms of management cost，capability of risk control and quality of personnel so as to remain invincible．The cost management should be strengthened to effectively control company cost．The capability of risk control should be improved to raise the ability to control risk．The quality of middle level administrators should be enhanced to set a good public image．The balanced development of various products should be encouraged to enrich the structure of commercial endowment insurance products and boost the innovation of commercial endowment insurance products．The supervision of commercial endowment insurance market should be improved，whose sound development has a lot to do with the improvement of social security system and people’s living conditions and the maintenance of economic prosperity．However，due to the late start and underdevelopment of the domestic commercial endowment insurance market，compared with developed countries，we are still in the preliminary stage of the supervision of commercial endowment insurance market．Many defects can be seen in the management structure，laws and regulations，methods and technology，all of which need to be strengthened and improved．The supervision information disclosure system should be established to solve the market information asymmetry，improve market function efficiency and transparency and safeguard the benefits of customers．Insurance industry features operational risk，which is closely related to public benefits．Therefore，more information should be disclosed by insurance companies than others．Effective disclosure platform should be established by insurance companies according to relevant regulations so as to disclose necessary information and promote t he improvement of system．

Notes:

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