Why does insurance pay more attention to honesty?

Abstract: Honesty is in the conflict and friction between ethics and economic interests, and the lack of honesty has become a severe challenge that China insurance industry must face. At present, the lack of honesty in China insurance industry is mainly reflected in three aspects: insurance suppliers, intermediaries and consumers. The root of the lack of insurance integrity lies in the defects of the system, which makes it difficult to effectively protect and expand the integrity behavior in insurance market transactions. The influence of the lack of good faith and the significance of good faith indicate that the good faith system should be established and improved. In order to ensure the sustained and healthy development of the insurance industry, a clear property right system and a perfect legal system of good faith should be established; Cultivate the concept of good faith and build the culture of good faith in insurance industry; Improve the insurance supervision mechanism, implement the disciplinary system of dishonesty, and increase the cost of dishonesty; Give full play to the role of industry associations and establish industry self-discipline system; Improve the information disclosure system and speed up the construction of the credit rating system. The concept of honesty and credit originated in the field of moral ethics, and has been enriched and expanded in the emergence and development of commodity economy, becoming an important concept in the economic field. In the traditional culture of China, honesty is regarded as a moral and ethical criterion, a normative requirement for behavior, and the unity of internal honesty and external non-fraudulent behavior. According to the perspective of economics, honesty, as a rule and system of communication between economic subjects, is not only a choice of moral norms, but also a choice of economic interests. Honesty is a relatively stable behavior rule formed between economic entities on the basis of long-term game, which is internalized into market transaction norms and order and externalized into laws and regulations. In the development of insurance industry, honesty is in the conflict and friction between ethics and economic interests, and the lack of honesty has become a severe challenge that China insurance industry must face. I. Analysis of the Lack of Honesty in China Insurance Industry and Its Roots In insurance activities, any party's violation of honesty and credit will lead to the obstruction of insurance transactions, thus affecting the value and use value of insurance services. At present, the lack of good faith in China insurance industry is not only reflected in the two parties and related parties of insurance contracts, but also in insurance intermediaries. 1. The insurance company lacks integrity. An insurance supplier is an insurance company that provides insurance products in the insurance market. Due to the lack of information disclosure of insurance companies and the strong professionalism of insurance business, insurance consumers are in a game of asymmetric information. It is difficult to know the real situation of insurance companies and insurance clauses before or even after insurance, such as the operating status, solvency and development status of insurance companies, and the degree of protection they can obtain after insurance. And they can only make judgments based on subjective impressions and the introduction of insurance agents, which objectively creates conditions for the dishonesty of insurance companies. Insurance companies and their staff conceal important information related to insurance contracts in insurance business, deceive the insured, the insured or the beneficiary, fail to perform or even refuse to perform the payment obligations stipulated in the insurance contract in time, and make some insurance consumers lose trust in the insurance company; Some insurance companies operate illegally, pay too high fees, give kickbacks, take too low rates and other vicious competition behaviors, which damage the social reputation of insurance companies; The selection, training and management of insurance agents are not strict, and some insurance companies mislead or even instigate insurance agents to carry out activities that violate the obligation of good faith, which seriously damages the image of insurance companies; Providing false reports, statements, documents and materials to insurance regulatory agencies. 2. Lack of integrity of insurance intermediaries. Insurance intermediaries include insurance agents, insurance brokers and insurance assessors. The lack of integrity of insurance intermediaries is mainly manifested in the following behaviors: deceiving insurers, policyholders, insured or beneficiaries in the middle of business; Concealing important information related to insurance contracts; Obstruct or induce the insured not to perform the obligation of truthful disclosure, etc. At present, there are a large number of people engaged in insurance agency business in China, and their professional quality and moral level are uneven. The lack of integrity of insurance intermediaries is mainly manifested in the lack of integrity of insurance agents. Driven by the interests of obtaining more agency fees, many insurance agents unilaterally exaggerate the value-added functions of insurance products, promise false high returns, avoid explaining the exemption clauses in insurance contracts, and even mislead the insured, causing economic losses to the insured and the insured, causing widespread dissatisfaction among insurance consumers. 3. Lack of credibility of insurance consumers. Insurance consumers include the insured, the insured and the beneficiary, and their lack of integrity is mainly manifested in the time of insurance and claim settlement: some insured people have not fulfilled their obligation to tell the truth when they apply for insurance, which makes it difficult for insurance companies to determine whether to underwrite and under what conditions according to the risk status of the insured; Some of the insured and beneficiaries deliberately fabricated the subject matter of insurance or lied about the occurrence of an insurance accident to defraud the insurance money, forged or altered certificates and materials related to the insurance accident, or instigated, abetted or bribed others to provide false certificates and materials and other evidence, fabricated false accident reasons or exaggerated the degree of loss to defraud the insurance money; Some insured and beneficiaries even artificially create insurance accidents, deliberately causing property losses and casualties of the insured, increasing the loss of insurance subject matter and social wealth, and increasing the cost of insurance claims. The root of the lack of honesty in China insurance industry lies in the defects of the system, which makes it difficult to effectively protect and expand the honesty in the insurance market transactions: 1. Unclear property rights system and soft constraints increase the externality of insurance companies' behavior. Reasonable property right system is the institutional basis of normal credit relationship. Property rights are excessively concentrated in the state, economic benefits are not completely linked with enterprise performance, and the lack of incentive mechanism is likely to lead to short-term behavior. Theoretically speaking, the state of honesty is often directly proportional to long-term interests and inversely proportional to short-term interests. A person who considers long-term interests is more likely to be honest and willing to maintain credit than a person who considers short-term interests. On the premise of clear property rights, the actor usually promises to keep his word from the long-term interests. The property right system of insurance company is the basic premise of establishing modern enterprise system, which determines the business purpose of insurance company and its relationship with social and economic parties, and affects the behavior of insurance company. "The basic function of the property right system is to provide people with a stable expectation of pursuing long-term interests and the rules of repeated games." China's insurance companies (especially the wholly state-owned insurance companies that occupy a large market share in the insurance market) have unclear property rights and soft constraints, and have not established a truly modern enterprise system. Therefore, it is not difficult for insurance companies to consider long-term interests and credit effects, and it is not difficult to understand short-term behaviors that pursue short-term interests. In fact, according to the viewpoint of game theory, in the case of one party's bad faith, one party suffers, the other party gains the maximum benefit, and the overall benefit tends to be minimized; In the case that both sides are dishonest and trustworthy, it is difficult for both sides to make a profit. That is, the fuzziness and soft constraints of property rights system will make insurance actors chase short-term interests and fall into the prisoner's dilemma in game theory, which will lead to the difference in quality and quantity of good faith behavior. 2. The management system of insurance providers and insurance intermediaries is not perfect, which makes the honest behavior of insurance company employees and insurance agents not completely controlled. The business operation of an insurance company is the result of the collection of behaviors of internal employees and insurance agents. The loyalty, ability and cooperation spirit of employees and agents are the basis of the integrity of insurance companies. When the integrity of employees and agents is out of control, it will affect the integration of insurance companies and weaken their integrity. Because the management system of insurance agents is not perfect, the post requirements are not strict enough, the implementation time of the certificate system is short, and the overall quality of insurance agents is low, it is difficult for insurance companies to completely control the dishonest behavior of insurance agents. 3. The imperfection of the national credit management system leads to the lack of credit guarantee mechanism, punishment mechanism and supervision mechanism. In a society with good credit, breaking promises will pay a price; However, in a dishonest society, trustworthy people will pay the price. Judging from the guarantee mechanism of honesty, a country with a sound social credit management system will protect the legitimate rights and interests of honesty and trustworthiness from the system, and honest people will get more trading and profit opportunities. At present, in China's insurance market, due to the imperfection of the national credit management system, the protection of credit is mainly based on people's ethical requirements. When the contradiction between sociality and humanity of "economic man" conflicts, the limited rationality of "economic man" makes him have selfish motives driven by the interests of maximizing his own interests, resulting in moral hazard that violates the principle of good faith, which is also an important source of the lack of good faith in the insurance field. In terms of punishment mechanism, countries with strict credit management system legally punish acts that violate good faith, and make them bear serious economic losses, which makes it unprofitable to break faith driven by economic interests, and will also lose future trading opportunities, prompting people to try their best to maintain their own reputation. At present, the punishment mechanism of dishonesty in China is not perfect, the legal punishment clauses are not perfect, the economic punishment is not strong, and the restraint mechanism is softened. It is difficult to restrain the appearance of dishonesty by mainly relying on public opinion to condemn from personality and ethics. In terms of supervision mechanism, the integrity supervision of China insurance industry is mainly reflected in moral self-discipline and limited supervision by public opinion. The mandatory and binding supervision of the law is still not perfect, and it is inevitable that acts of dishonesty will be repeatedly banned and repeated. Second, the impact of the lack of good faith on the insurance industry in China and the significance of good faith. In insurance activities, honesty and trustworthiness are the maintenance and respect for the legitimate rights and interests of the other party to the insurance transaction, as well as their own legitimate rights and interests. The lack of good faith will eventually make the interests of the untrustworthy suffer. The result of moral choice of honest behavior in insurance activities must logically reflect its economic interests. It can be said that without integrity, there will be no credibility, and there will be no long-term sustainable development of the insurance industry. When the lack of integrity in the insurance industry escalates into a crisis of integrity, the insurance parties will distrust each other, or need to prove that the other party is trustworthy with many facts, which will greatly increase the cost of insurance transactions and narrow the scope of insurance transactions, making it difficult for the actors in the insurance market to communicate and exchange normally, and making the insurance market lack the basis for normal operation. Obviously, honesty is of great significance to the insurance industry in China. 1. Integrity is an inherent requirement for the survival and development of insurance companies. Reputation is the life of an enterprise. Insurance products are typical intangible products, which are promises made by insurance companies to customers with credit, and bear the responsibility of paying insurance benefits for possible insurance accidents in the future. Therefore, whether an insurance company is honest or not plays a great role in the purchase decision of insurance consumers. Consumers will only insure on the basis of trust in insurance companies, and will only insure from insurance companies that they think are reputable. In this way, the reputation of insurance companies will directly affect their survival and development. Only by being honest can insurance companies create a good external environment for sustainable development. 2. Integrity is the core competitiveness of insurance institutions. Under the condition of market economy, especially after China's entry into WTO, the competition among insurance institutions (including insurance companies, insurance agencies, insurance brokers and insurance assessors) is extremely fierce, and honesty has become one of the core competitiveness of insurance institutions. Only an honest and trustworthy insurance institution can occupy a favorable position in the market competition. In the final analysis, the competition between insurance institutions is the competition between reputation and brand, which is based on the integrity of insurance institutions. Without integrity, there will be no credibility and brand, and it will be difficult to win customers and win in the competition, which means losing the possibility of long-term development in the future. Good credit of insurance institutions is an important guarantee for them to win the market. Only by establishing the image of honesty can we enhance the core competitiveness of insurance institutions. Only when insurance institutions treat each other with integrity, abide by laws and market rules, and fulfill contractual obligations can they enhance their competitive strength and create conditions for broader market access and expanded transactions. 3. Integrity is the confidence index of the vitality of the insurance market. The expansion of dishonesty in the insurance market and the lack of integrity system will increase the risk of insurance transactions, make insurance actors lack confidence in the insurance market, hinder the development of insurance transactions, and even make the insurance market in a long-term downturn. It can be said that the reason for the weakness of the insurance market lies in the lack of integrity. On the one hand, the dishonesty of insurance companies and insurance intermediaries affects the confidence of insurance consumers in the insurance market; On the other hand, the dishonesty of the insured, its related parties and insurance agents has also damaged the confidence of insurance companies in engaging in insurance transactions. That is, the spread of dishonest behavior and the moral hazard caused by it will reduce the confidence index of both insurers in the insurance market. 4. Honesty helps to strengthen cohesion and promote a virtuous circle of insurance development. On the one hand, credit is an important embodiment of the value of employees. If the insurance institution has high integrity, employees will be full of pride and honor, and it is easy to have a sense of identity with the behavior of the enterprise, enhance their understanding of the fate of the enterprise and form the cohesion of the enterprise. Similarly, only the integrity of all employees can have the credibility of insurance institutions; On the other hand, in insurance activities, insurance transactions are blocked because of possible fraud between insurance parties, so the integrity of insurance parties is conducive to the realization of insurance transactions. In the market economy, honesty is the basic criterion of market behavior. For the actors in the insurance market, honesty is a game rule with moral and legal significance. Only when practitioners abide by this rule can we ensure the orderly competition, realize the benign interaction and balance between insurance supply and insurance demand, and promote the long-term sustainable development of the insurance industry. 5. The particularity of insurance business activities requires the utmost honesty of both parties. The insurance market is a typical information asymmetry market. On the one hand, the risks insured by the insurer are the risks that may occur in the future, not the risks that have already occurred. The risk of the subject matter insured itself and even the environment in which the subject matter insured is located directly affect the probability of risk occurrence and the degree of loss. Moreover, the risk status of the subject matter insured may change after the insurer underwrites it. The subject matter of insurance is usually under the control of the insured, and it is difficult for the insurer to accurately grasp the real situation and changes of the subject matter of insurance, but the insurer's underwriting choice and compensation are closely related to the situation of the subject matter of insurance. Obviously, compared with the insured, the insurer's information about the subject matter insured is insufficient; On the other hand, the insurance contract is professional and technical, involving a wide range of knowledge, which is difficult for the insured, the insured and even the beneficiary to understand accurately. Compared with the insurer, the insured has insufficient information about the insurance clauses. Asymmetric information in the insurance market leads to an increase in transaction costs, which may lead to moral hazard and directly damage the legitimate rights and interests of the subjects of insurance contracts. Only when the parties to an insurance contract are honest and trustworthy to the greatest extent can they reduce the transaction cost of the insurance market and ensure the development of the insurance industry. The influence of lack of good faith and the significance of good faith indicate that we should establish and improve a good credit system, form a good credit order, increase the certainty and predictability of insurance trading activities, reduce the friction between insurance subjects, standardize insurance trading behavior, reduce insurance trading costs, improve insurance economic benefits and ensure the sustained and healthy development of the insurance industry. Thirdly, the idea of constructing the credit system of China insurance industry. Credit system is the norm and guarantee of credit behavior and its relationship. This kind of institutional arrangement has both formal and informal systems. 1. Establish a clear property right system and a perfect legal system of good faith. When insurance market participants engage in insurance activities, driven by economic interests, they often lose their rationality and violate the principle of good faith. Therefore, it is difficult to ensure the honest behavior of both parties to the transaction by relying on market mechanism and moral constraints, and we must rely on the external coercive force of the system-clear property rights system and sound legal system. The operation of market economy needs corresponding property rights system, and property rights can guide people to internalize externalities to a great extent. Clarifying the relationship between property rights is the institutional guarantee for standardizing the honest behavior of economic actors. Under the condition of clear property rights system, the honest behavior of traders helps them to maximize their own interests better. Market economy is a legal economy, and only by ensuring clear property rights through laws can we truly lay the binding foundation of integrity; Only through legal constraints, establish and improve the mechanism of protecting the interests of honest people and the mechanism of punishing dishonest people, can we promote the behavior of the main body of the insurance market to be more standardized and meet the requirements of honesty, protect the legitimate rights and interests of both parties to the transaction, and promote the healthy development of China's insurance market. Only by perfecting the legal system related to honesty can the benefit of honest behavior of the parties be greater than that of dishonest behavior, and the cost of honesty be less than that of dishonesty. Through the protection of the legal system of good faith, an honest and trustworthy insurance relationship will be formed in the whole insurance market, so that only by standardizing insurance behavior, paying attention to the image of good faith and constantly improving reputation can each market participant obtain more trading opportunities and obtain greater benefits; As long as either of the two insurance companies has a record of violating the integrity, it will be punished by law in future insurance activities, and those who seriously fail to keep the integrity will be eliminated, so that the insurance integrity system can be truly established on the track of legalization. It can be seen that a clear property right system is the premise of maintaining integrity, and a sound legal system is the guarantee of maintaining integrity. 2. Cultivate the concept of good faith and build a culture of good faith in the insurance industry. Honesty is not only a moral pursuit, but also has economic significance. In the market economy, credit is a kind of wealth, and good credit is a precious scarce resource. The more developed the market economy is, the more honesty is needed. A dishonest enterprise or individual cannot develop. All kinds of actors in the insurance market should change their concepts, re-understand the relationship between corporate interests, personal interests and integrity, and establish a sense of responsibility to maintain integrity. The whole society (especially insurance companies) should attach great importance to honesty education and publicity, cultivate the concept of honesty, make the ethical spirit of honesty and trustworthiness penetrate into the consciousness of all insurance parties, and create the ideological basis of honesty. Insurance institutions should regard honesty culture as an important, core and indispensable content of corporate culture, establish an honest and trustworthy professional ethics, and create a good industry atmosphere for honest behavior. In the training of employees of insurance companies and insurance agents, we should attach importance to honesty education, increase honesty content, and let employees of insurance companies and their agents know which behaviors belong to dishonesty and what legal responsibilities they should bear for dishonesty. Insurance companies and their related institutions should make use of various publicity tools and means to publicize the significance of honesty to the development of enterprises and individuals, strengthen the awareness of honesty and advocate the concept of honesty by adopting various management measures and moral constraints, so that honesty becomes the conscious behavior of both parties to the insurance, and reflects its own value with good honesty and high credit rating. 3. Improve the insurance supervision mechanism, implement the disciplinary system for dishonesty, and increase the cost of dishonesty. While establishing and perfecting the legal system of good faith, we should strengthen the enforcement of existing laws and regulations and urge insurance actors to abide by these laws and regulations. As the main regulator of the insurance market, CIRC, on behalf of the government, strengthens law enforcement through supervision, encourages and guides honest behavior, cooperates with judicial organs to punish dishonest behavior according to law, and promotes the construction of insurance honest system. China is still deficient in raising the "cost of dishonesty" of those who have broken their promises, and the "cost of dishonesty" is slight, which has not played a disciplinary role. Therefore, we should construct a punishment system for dishonesty from the aspects of legal and moral constraints, improve the supervision mechanism to protect and punish the faithless, increase the interest cost, moral cost and even political cost of the faithless, and make the actors face the high cost of "faithless". The only rational choice can only be honesty to ensure the orderly operation of the entire insurance market. 4. Give full play to the role of industry associations and establish industry self-discipline system. Trade association is an important organization to coordinate and balance the interests of market players and improve the efficiency of resource allocation. In countries with mature market economy, all market players are under the management of trade associations, which conduct self-discipline and management on behalf of the overall interests of the industry, and those who break their promises will be rejected and punished by trade associations. China's insurance industry associations have done a lot of work in recent years, but the binding force on insurance companies is still not enough. To construct the credit system of insurance industry, we should give full play to the role of insurance industry associations and establish a self-discipline system of insurance industry. 5. Improve the information disclosure system and accelerate the construction of the credit rating system. We should make a scientific and accurate credit risk rating on the credit status of insurance market subjects, such as the solvency of insurance companies, the moral credit level of insurance companies, insurance intermediaries, policyholders and insured, so as to determine the credit rating. Through the construction of credit rating system and information disclosure, the main body of the insurance market has always been honest and trustworthy, and earnestly fulfilled the obligations stipulated in the insurance contract. When establishing China's credit rating system, we should pay attention to the docking with the rating standards and technologies implemented by international credit rating agencies, absorb advanced foreign rating methods and combine with China's reality to form a scientific and reasonable credit rating system. It is necessary to manage or integrate the scattered information and data reflecting the credit status of insurance institutions and individuals on the Internet to realize the sharing of credit information resources. We can consider establishing a commercial credit operation mechanism, setting up a credit record company, investigating and registering the credit status of all people involved in insurance activities in the insurance market as far as possible, inputting the recorded data into the computer database, tracking and investigating the credit changes of customers at all times, and providing 24-hour online paid service through the Internet. When insurance institutions need to investigate the credit status of insurance customers, or when insurance consumers investigate the credit of insurance companies and insurance intermediaries, they purchase credit record information from credit reporting companies. This new credit mechanism can distinguish and judge the credit status of insurance actors, put people with bad credit records on the "blacklist" and expose the image of faithless people to the public, which not only enables insurance consumers to choose insurance companies and insurance agents with good credit records, but also makes it easier for insurance companies to audit policyholders and insured. In short, China should establish and improve the insurance credit system, form a set of code of conduct to enhance the credibility of insurance institutions, and unify the economic value orientation of insurance institutions and insurance consumers and the moral value orientation of honesty and trustworthiness into credit behavior, so that credit can reflect the social value orientation of "unity of justice and benefit" in the market economy in a more complete sense, and ensure that both insurers maintain the insurance market order under the dual constraints and drive of morality and law. Constantly adjust one's economic behavior in the balance of interests, realize the maximization of one's own interests without violating honesty and credit, bring balanced interests and long-term interests to both sides of the insurance, and maximize the interests of the insurance market.

Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.