Neglected risks in the Chinese insurers' misconduct caused by digitalization.

Area of Science:

• Business and Economics
• Information Systems

Background:

• Digital transformation presents both growth opportunities and misconduct risks in the insurance industry.
• Understanding the relationship between digital transformation and misconduct is crucial for regulatory oversight and industry stability.

Purpose of the Study:

• To examine the impact of digital transformation on misconduct within the Chinese insurance industry.
• To identify specific factors and channels through which digital transformation influences insurer misconduct.

Main Methods:

• Text analysis was employed to quantify digital transformation and misconduct levels.
• The study analyzed data from 72 Chinese insurers between 2010 and 2021.

Main Results:

• Digital transformation generally correlates with increased misconduct, particularly for property insurers and those with joint or foreign ownership.
• Issuing digital policies and adopting technology beyond managerial capacity significantly exacerbate misconduct.
• Market expansion and financial pressure are key channels through which digital transformation drives misconduct.

Conclusions:

• Insurers with larger market shares, lower commissions, and operational costs are more susceptible to misconduct during digital transformation.
• Mitigating factors include higher insurance density, market penetration, premium income growth, and reduced economic uncertainty.