The Micro-economic problems Related to Financial Risk of Insurance Market

Insurance market is a typical market of information asymmetry, which can lead to two main problems:adverse selection and moral hazard.However, another kind of problem resulting from information asymmetry emerged recently and is attracting more and more attentions from supervisors and the public.It is that the insurers may take advantage of the asymmetric information and do something adverse to policyholders, potential consumers and even the investors of the society.The asymmetry of the possession of the information can be very easily used by insurers, and this will lead to low efficiency of the insurance market.Currently, the issues of information asymmetry between the insurers and policyholders are standing out and hinder the continuable development of China's insurance industry.This paper gives a theoretic analysis of the formation mechanism of information asymmetry issues, makes a summary of the solutions, and provides some advice about how to tackle the issues in China.