Confucian model, Conclusions - Regulation of insurance activities

Confucian model

The Confucian model of economic regulation is based on the "strong" a state that actively regulates and directs the economic life of the country, engaging, primarily, the strategy of economic growth.

For more than 2,000 years, the Confucian doctrine has had a tremendous impact on the history, politics, economy and culture of the countries of East Asia and the surrounding regions. Despite the rapid growth of gross domestic product (GDP), high living standards and economic achievements, Asian countries continue to adhere to the Confucian cultural values ​​that they have followed for hundreds of years, which undoubtedly influences the development of insurance markets of these countries.

Countries in the East Asia region, also called Confucian Asia (for example, China, Japan, South Korea, North Korea, Mongolia) share common cultural values ​​and traditions such as humanity, justice, trust, honesty, and politeness. These cultural values ​​and traditions are fundamental to the Asian society and have deep roots in three religious and philosophical traditions: Confucianism, Buddhism and Taoism. However, it was Confucianism that had the greatest impact on the history, politics, economy and culture of the countries of the East Asian regions. And the theoretical concepts, styles and practices associated with government and regulation of financial markets, are seriously different in the eastern and western traditions.

Despite the diversity of styles of leadership and economic practices, traditions and values, the current processes of globalization dictate the need to advance closer cooperation and understanding of the national characteristics of states in the common goals of maintaining peace and harmony.

Historical excursion

The principles of the Confucian tradition

Xiao - the principle of filial piety. According to Confucius, Xiao (filial piety) is the root of all virtues and is thus regarded as the greatest of virtues. Xiao refers to showing respect and obedience towards both parents, as well as living and dead ancestors. According to Confucius, government begins with the regulation of the family, and moral teaching must first of all be practiced in the family.

Zhong and Shu - loyalty and reciprocity. It is necessary to do to others what you want for yourself. Shu follows the golden rule of Confucius: never impose on others what they do not want.

Xin - reliability (honesty, truthfulness and loyalty) is another cornerstone in Confucianism. Truth or fidelity is considered as a basis in interpersonal communication, people management and administration in government regulation.

Zhi is wisdom. Understanding and wisdom are the features inherent in virtuous leaders.

Lee - decency. This is a comprehensive system of rules, including respected traditions, social and legal norms.

And - righteousness, justice in words and actions.

Ren - kindness or perfect virtue. It is considered as benevolence, love, kindness, mercy, compassion, altruism.

paternalistic, bureaucratic and authoritarian styles of leadership have their roots in the Confucian virtues of Lee (rites and rituals, rules of propriety), Zhong (devotion) and Xiao (filial piety and filial devotion). In the countries of South-East Asia, the implementation of Confucian ideology is expressed in absolute respect for power and the adoption of a hierarchy based on virtues in relation to the state as a whole. The family is the microcosm of the state, and the state is the expansion of the family.

The processes of globalization, the liberal ideology of Western European countries and convergence have made some adjustments to the traditional understanding of the Confucian model of state regulation towards its democratization. However, the main features: authoritarianism, centralized decision-making, a long distance of power and the people - remained.

Foreign Experience

According to a study conducted among 1,598 executives and specialists of large international or national companies located in the US, Mexico, Japan, South Korea and Taiwan, decision making helps to clarify the expected results and improve the wording of the task and thereby improve the satisfaction of subordinates by supervision and a decrease in role uncertainty.

The most clearly Confucian tradition is evident in the Japanese style of management and regulation of financial markets. The Japanese economy, faced in the past with numerous problems, in the 1990s, overcame the crisis of overproduction, inefficiencies in the banking sector. The revival in the business environment, the widespread use of information technology, new, more open standards of accountability, and the easing of the tax burden - all contributed to the exit from the economic recession.

Decrease in the rate of economic growth of Japan in 1980 - 1990's. stimulated in 1994 the beginning of large-scale economic reforms, within which the insurance market was transformed, aimed at liberalizing insurance legislation. In October 1994, in accordance with the agreement between the governments of Japan and the United States, it was announced that the system of state pricing for insurance products for certain types of insurance was canceled and the system of insurance brokers was introduced, which began functioning in April 1996.

On April 1, 1996, a new Japanese insurance law came into force. Many insurance specialists in Japan agree that its adoption can be considered the most drastic change in all 56 years that have passed since the adoption of the law on insurance in 1939. The basis of the law developers have laid down three fundamental principles: protection of the rights of the insured, its transparency for the consumer of insurance services, the contribution of insurance to the national economy and the harmonization of national insurance with the world insurance market. In addition, the new insurance law provided opportunities for the development of additional consumer protection programs, as well as to ensure the safety of the insurer, its protection against fraud.

In 1996-1999. legislative requirements for the control of insurance companies in the field of pricing and insurance conditions were consistently abolished, until finally, in July 2000, the full liberalization of tariffs for insurance services was achieved.

A significant achievement of liberalization of Japan's insurance national market was the removal of restrictions that prevent access to the market for new players from among non-insurance financial institutions. In December 1998, restrictions on mergers between insurance companies and banks were partially lifted, since October 1999, insurance companies have been able to enter banking groups as subsidiaries, and since April 2001 banks have been allowed to enter the insurance market of another, than life insurance, as full participants.

In general, liberalization of the insurance market was carried out in line with general financial liberalization aimed at increasing the efficiency of financial intermediaries by reducing costs and providing consumers with freedom of choice. For insurers, this meant increased competition and the entry of new players into the insurance market: foreign insurance companies and non-insurance financial institutions.

In 2010-2012. the insurance market in Japan was exposed to low interest rates and lower quotations of securities, which affected both the market structure and regulatory changes. The insurance market in Japan is highly concentrated. Despite the attractiveness of the Japanese market for foreign insurers, few have access to it: the share of foreign insurers is 7.7% in the life insurance sector and 4.7% in the insurance sector other than life insurance.

The loud bankruptcy of seven leading Japanese insurance companies in the early 2000s. led to a series of mergers and acquisitions in the insurance market. As a result, the backbone from several large players, and the market has slightly opened for foreign insurers. In the period 2010-2011. a series of major megaslings in the Japanese insurance market led to a situation where there were only three financial groups (financial conglomerate) that controlled more than 95% of the insurance market in the insurance sector other than life insurance, and four life insurance companies that controlled 65% of the market ( without Japanese life insurance by mail - Japan Post Insurance, JPI). Also in connection with the crisis, the requirements to the regime for securing long-term solvency of insurers were revised. With financial difficulties in the company, the insurer could now change the terms of the insurance contract (especially in long-term life insurance) in the direction of reducing the guaranteed yield.

The Japanese insurance market regulation system is a mixture of the norms of civil legislation, the traditional Confucian approach and the traditions of case law (American type) that appeared after the Second World War. Sources of legal regulation of insurance activities: The Constitution of Japan, which is the highest legal force; five codes (the legacy of the German and French traditions of the nineteenth century): the Civil Code, the Commercial Code, the Code of Civil Procedure (Code of Civil Procedure the Civil Procedure Code, The Criminal Code, The Criminal Procedure Code . Existing gaps in insurance legislation are filled on the basis of the principles of common (case law).

Japan's insurance market is an important financial sector of the country. In 2011, the total assets of insurance companies were 78% of Japan's GDP, or 373 trillion yen. Leading the life insurance sector, where the assets of companies are more than 291 trillion yen. It is also one of the world's largest markets, behind only the US and the European Union. Japan accounts for about 80% of all insurance premiums collected in the Asian region for life insurance, and approximately 70% of all insurance premiums collected in the world for insurance other than life insurance. In the world market, the Japanese insurance market is on the second place after the American insurance market, (Table 6.2). According to the volume of the signed premium, the Japanese market is one of the largest in the world, its share is 13%. The total amount of the collected life insurance premium for 2011 was 34 trillion yen (about 17.5% of the world's collection), losing only to the United States. The non-life insurance sector shared the second place with the German insurance market. In the insurance sector of Japan's economy employs more than 2.7 million people.

Table 6.2

The Japanese insurance market among 10 of the world's leading insurance markets, 2012

Ranking place in 2012 (place in 2011)

Country

The volume of premiums in 2012, million dollars

Growth of premiums by 2011 adjusted for inflation,%

Market share in 2012

(in 2011),%

KD

US

1270884

1.9

27.55 (26.22)

2 (2)

Japan

654112

7.9

14.18 (14.26)

3 (3)

United Kingdom

311418

-2.1

6.75 (6.95)

4 (6)

China

245511

5.2

5.32 (4.83)

5 (4)

France

242459

-5.5

5.26 (5.94)

6 (5)

Germany

231908

0.3

5.03 (5.34)

7 (7)

Italy

144218

-5.7

3.13 (3.49)

8 (8)

South

Korea

139296

9.0

3.02 (2.84)

9 (9)

Canada

122532

0.7

2.66 (2.64)

10 (10)

Netherlands

100342

-2.5

2.18 (2.41)

In non-life insurance, Japan's share of the world market is only 6.5% of the world market. Although Japan ranks second in the world after the United States in this area of ​​insurance business, the main business income is concentrated in the life insurance sector (Figure 6.4-6.5).

Japan's share in the global insurance market (not life) in 2012. Top 5 of the leading countries,%

Fig. 6.4. Japan's share in the global insurance market (not life) in 2012. Top 5 of the leading countries, %

As can be seen from Fig. 6.4-6.5, in life insurance, Japan lags behind the US by only 1.65%, and the growth rate of this segment, despite the events of 2011, was 9%, which is the best indicator among developed countries. For comparison, in the US the growth was 2.3%, and in the third market by the size of the signed premium, the UK, the growth was negative: -3%.

Japan's share in the global insurance market (life) in 2012. Tone of the 5 leading countries,%

Fig. 6.5. Japan's share in the global insurance market (life) in 2012. Tone of the 5 leading countries,%

Japanese insurance companies are mainly focused on the domestic market and are the largest investors in the Japanese government debt market. The volume of assets held by Japanese insurance companies is huge and comparable to that of American insurance companies (Figure 6.6). The bond/equity ratio in their assets is 9.75. Therefore, in the near future Japanese investors (not only insurance companies) will not redirect their assets from Japanese bonds to foreign bonds.

The peculiarity of the Japanese market is also its formation and functioning under strict control of the Japanese government (this is typical for Confucian traditions), which weakens the competitiveness of Japanese insurance corporations. This specificity leads to the fact that Japanese insurance companies, as a rule, are national and operate on the national market. At the same time, it was the state regulation that enabled the development of insurance activities in Japan. At present, the role of the state is changing, and the degree of state regulation is decreasing.

Fig. 6.6. Assets at the disposal of Japanese insurance companies

The Japanese insurance market is characterized by a high degree of concentration. The life insurance sector (data for 2012): Japan - 47 companies, the United States - 875 companies, the United Kingdom - 190 companies, France - 231 companies. Insurance sector other than life insurance: Japan - 52 companies, the USA - 3,441 companies, Great Britain - 790 companies, France - 259 companies. The share of the Japanese insurance market life insurance system by mail is about 21%. The insurance business in the continental regulatory model is controlled, as a rule, by several ministries. In addition, in the countries of continental Europe there are also consolidated regulators.

Practice questions

In Japan, a whole set of legislative acts regulating the insurance system is developed:

• The Business Insurance Act of 1966;

• The 1948 Laic Concerning Non-Life Insurance Rating Organizations;

• The Law on Insurance Intermediaries (the 1948 Law on Insurance Solicitors (Intermediaries);

• The Law on Foreign Insurers (the 1949 Law Concerning Foreign Insurers);

• The law on compulsory motor insurance ( the 1955 Automobile Liability Security Lauf;

• The Law on Earthquake Insurance ( the 1966 Law Concerning Earthquake Insurance);

• The Financial System Reform Act ( the 1998Financial System Reform Law);

• The Law on the Sale of Financial Products ( the 2000 Law on Sales of Financial Products);

• The Consumer Contract Law ( the 2001 Consumer Contract Law).

The peculiarity of the Japanese insurance market is the life insurance system by mail ( kampo ). It is regulated by a variety of various industry laws. Due to the progressive aging of the population in 2000 and 2004, The Pension Reform Act was enacted, in 2002 the Health Insurance Act (with regard to state health insurance) was amended, which seriously changed the social insurance system in Japan. As a result, deductions for social insurance from 13.58% in 2004 will increase to 18% by 2017. At the same time, the profitability of these assets will decrease from 59 to 50% per worker. A package of legislative amendments on the privatization of post offices (September 2005) established the division of the Japanese Post into four private companies, only one of which received permission to work on life insurance by mail. Thus, it is expected that the market of postal insurance will not actively develop.

The activities of Japanese insurance companies are focused mainly on the domestic economy. We can say that this is a highly structured, technological and concentrated market with a large number of insurance products. At the same time, the most important types of insurance are: life insurance, medical insurance, automobile and property insurance. All companies are large scale and closed for foreign businessmen.

Practice questions

In Japan, there is a division of insurance into the "marine" and non-marine & quot ;. This happened historically because of the territorial peculiarities of the state (most of the trade transactions are carried out by sea supplies). However, the law distinguishes only life insurance and insurance, other than life insurance. It should also be noted that the rapid development of trade relations and the restoration of the world's largest trading houses (Mitsui, Mitsubishi), as well as the trend towards concentration of insurance capital in Japan, led to the fact that of the five largest insurers in the world, two are Japanese.

Prospects for further development of the insurance market in Japan. The insurance industry in Japan is going through a transition period amid the economic crisis and financial globalization. It is expected that the liberalization of insurance and financial markets, the provision of foreign market access to insurers and demographic changes will lead to a significant transformation of the national insurance space.

Of particular importance in Japan is the social protection system. Social support in the form of direct assistance to the needy, which is paid from public financial resources, as well as the payment of insurance in the event of unforeseen circumstances from the funds generated from the contributions of individuals and employers, as well as public subsidies, represent the two main pillars of the Japanese social protection system. Expenditures on social protection are becoming more extensive, their growth turns into the main problem when drawing up the state budget.

In the 1990's. in order to withstand unfavorable demographic trends, a new system of social protection was developed in Japan. In December 1994, the government formulated the "Angel Plan" (help in raising children). He established the practice of caring for children under the age of 3 in day care centers and nurseries and distributed it throughout the preschool period. In April 2000, the government began to establish an insurance system for elderly people with home care.

Conclusions

1. Takaful is a system based on the principles of mutual assistance and voluntary contributions, which provides for the collective and voluntary sharing of risks among group members.

2. In large Islamic financial economies, Takaful plays an important role and is used in conjunction with Islamic banking and investment to provide the necessary coverage.

3. The difference from classic insurance in Takaful is the client's participation in the company's profits. It is made either in the form of a discount for the insurance period of the next year, or as a payment in case of termination of the relationship with the client.

4. The peculiarity of the Japanese market is also its formation and functioning of iodine by tight control of the Japanese government. This specificity leads to the fact that Japanese insurance companies, as a rule, are national and operate on the national market. The Japanese insurance market is characterized by a high degree of concentration.

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