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

Jiandi Zhang1, Xiaoqing Guo2, Rui Xu3

  • 1Shanghai Lixin University of Accounting and Finance, Shanghai, China.

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Summary

Digital transformation in the insurance sector increases misconduct, especially for property insurers. This trend is driven by market expansion and financial pressures, but can be mitigated by factors like higher insurance density.

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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.