ON THE COORDINATED DEVELOPMENT OF PUBLIC NATURE AND COMMERCIAL NATURE OF LIABILITY INSURANCE
Luo Can
TABLE OF CONTENTS
I. INTRODUCTION
II. THE CURRENT CONTRADICTION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE OF LIABILITY INSURANCE IN CHINA
A. The Contradiction at the Judicial Level
B. The Contradiction at the Market Level
III. THEORETICAL PROOF OF THE COORDINATION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE
A. Noncontradiction between Public Nature and Commercial Nature
B. The Necessity of Coordinating Public Nature and Commercial Nature of Liability Insurance
C. Feasibility of Coordinating Public Nature and Commercial Nature of Liability Insurance
IV. DIVERSIFIED STANDARD OF COORDINATING PUBLIC NATURE AND COMMERCIAL NATURE
A. Coordination between Protecting the Weak of Liability Insurance and Freedom of Contract
B. Coordination between Public Policy and Operation Technology
V. LEGAL COUNTERMEASURES FOR THE COORDINATION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE OF LIABILITY INSURANCE IN CHINA
A. Straighten Out the Relationship between the Liability Insurance Law and the Tort Liability Law
B. Product Innovation on Liability Insurance
C. Proper Expansion of Compulsory Liability Insurance and Commercial Operation of Policy Liability Insurance
VI. CONCLUSION
The practical problem that the development of China’s liability insurance face can be attributed to the contradiction between public nature and commercial nature. Judging from the development history and the four-dimensional attribute of modern insurance, there is no contradiction between the two and the coordinated development has necessity and feasibility. The coordinated development of the insurance transaction fairness and contract freedom, the insurance public policy and operation technology should be the basic standard. In the future, the system will be optimized from straightening out the relationship between the liability insurance law and the tort liability law, innovation of insurance products, moderate expansion of compulsory insurance, the commercial operation of policy insurance and the improvement of insurance regulatory mechanism, etc.
I. INTRODUCTION
‘In modern society, insurance policies are not merely contracts but also are designed to perform particular risk management, deterrence and compensation functions important to economic and social ordering.’ In China, fully developing commercial insurance, especially the social management function of liability insurance, has long been the basic policy of the Party and the State. The report to the 19th National Congress of the Communist Party of China (CPC) clearly states that ‘adopting a new vision for development’ and the reports to the 17th and 18th CPC National Congress point out to make the commercial insurance play a role in the social security system. The Several Opinions of the State Council on the Reform and Development of the Insurance Industry explicitly requests to vigorously develop liability insurance and improve work safety assurance and emergency response mechanism; The Several Opinions of the State Council on Accelerating the Development of the Modern Insurance Service Industry puts forward that liability insurance plays a part in resolving conflicts and disputes and emphasis shall be laid on the development of liability insurance in the fields such as environmental pollution, food safety, medical liability, medical accidents, internship safety and campus security, which are closely related to public interests. The Integrated Reform Plan for Promoting Ecological Progress issued by the CPC Central Committee and the State Council explicitly proposes to vigorously develop compulsory environmental pollution liability insurance. The China Insurance Regulatory Commission, all departments, local governments and other parties, actively explore and develop the construction of the legal system of liability insurance. In recent years, the China Insurance Regulatory Commission and various departments have jointly issued more than 10 relevant policies and regulations and over 100 regulations and normative documents, such as the Guidelines for the Pilot Projects of Compulsory Environmental Pollution Liability Insurance and the Notice of Actively Promoting Fire Public Liability Insurance and Effectively Improving Fire Accident Prevention and Risk Management. During the Two Sessions at all levels for the past few years, delegates also put forward a number of proposals. For example, insurers should positively conform to social demand, regard the liability insurance market as a strategic focus and offer relevant products and services.
However, the development of China’s liability insurance market faces many problems. The public have great expectations for the public function of insurance but have a negative evaluation of business operations of insurance; such public opinions have affected the judicial stance of liability insurance disputes. In many cases, the court has to deviate from the legal provisions and insurance clauses to protect policyholders and third parties in a weak position; insurance companies and industry could have used the contractual mechanism to guide the court to respect the market, but there are few reflections and actual efforts. As a result, incidents such as the declination of coverage and loss occur frequently. In addition, products with broad social demands are difficult to promote or operate at a loss due to the limitation of operation technology. In this regard, many normative documents put forward the policy opinions on the development of the liability insurance market from the perspective of public nature, but do not elaborate how to deal with the relationship between public nature and commercial nature, which impacts the public nature in practice.
The root of these problems lies in the contradiction between public nature and commercial nature of liability insurance in China. We wonder if there is a true or false contradiction between the two. Can they achieve the coordination? If so, what are the criteria? How to achieve it? Based on this, the paper is divided into four parts. The first part is to sort out the status quo of the contradiction between public nature and commercial nature of liability insurance in China; the second part demonstrates the necessity and feasibility of the coordination of public nature and commercial nature of liability insurance; the third part analyzes multiple criteria of the coordination from four dimensions, which are the judicature, public, market and government; the fourth part puts forward proposals for the improvement of relevant legal systems in China.
II. THE CURRENT CONTRADICTION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE OF LIABILITY INSURANCE IN CHINA
Modern liability insurance has become a financial instrument that spreads the risk of the infringing party’s behaviors and ensures the injured party’s compensation. In particular, China’s product and food safety problems have frequently occurred in recent years and a series of incidence such as problematic vaccine have provoked deep thought of the public. The public function of liability insurance products has been embraced by people gradually. However, the public has negative emotions about the business operations of insurance. Due to the lack of insurance culture and irrationality of insurance marketing behaviors, etc., the public opinion environment which the insurance industry in China faces is unsatisfactory. The affirmative expectation of the public function of liability insurance and the negative evaluation of the insurance market reflect the contradictory status quo of public nature and commercial nature at the ethical level. It seems that in the public opinion atmosphere, although liability insurance has the attributes of public products, it is difficult to achieve through business operations. In fact, the contradiction between public nature and commercial nature of liability insurance are even prominent at the judicial and market levels, which has become a realistic problem urgent to be solved in the development of liability insurance in China.
A. The Contradiction at the Judicial Level
The negative evaluation of insurance market and the public opinion atmosphere overemphasizing the public nature of insurance have affected the judicial stance of liability insurance disputes. At the judicial level, even though the provisions and contractual stipulations are clear and explicit, the court shows a tendency to deviate from the legal provisions for the protection of policyholders and the third parties. Take the illegal driving risk such as drinking alcohol and driving without a license, etc., as an example. According to article 22 of the Regulation on Compulsory Traffic Accident Liability Insurance for Motor Vehicles of 2006, if the insured has an insurance accident when drinking alcohol, driving without a license, driving the type of vehicle which cannot match the driving license, or not renewing the driving license, the insurance company underwriting the compulsory traffic accident liability insurance for motor vehicles (compulsory traffic accident liability insurance) only pays rescue expenses in advance and undertakes no compensation liability.
However, judgments rendered by local courts when applying the article are various. Reviewing the PKULaw database, results in more than 800 cases of compulsory traffic accident liability insurance applying article 22 show that if the insured has an insurance accident when drinking alcohol, driving without a license, driving the type of vehicle which cannot match the driving license, or not renewing the driving license, judgments of the local courts are not unified (Table 1). Among 168 drunk driving cases of compulsory traffic accident liability insurance, four types of judgments are as follows: there are 33 cases in which the insurance company only pays rescue expenses in advance, accounting for about 20 percent; there are 110 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 65.5 percent; there are 12 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 7.1 percent; there are 13 cases in which the insurance company compensates personal injuries and property damage within the limit of liability, accounting for about 7.7 percent. Among 455 cases of driving without a license of compulsory traffic accident liability insurance, four types of judgments are as follows: there are 57 cases in which the insurance company only pays rescue expenses in advance, accounting for about 12.5 percent; there are 351 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 77.1 percent; there are 4 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 0.9 percent; there are 40 cases in which the insurance company compensates personal injuries and property damage within the limit of liability, accounting for about 8.8 percent. Among 31 cases of drunk driving and driving without a license of compulsory traffic accident liability insurance, four types of judgments are as follows: there are 2 cases in which the insurance company only pays rescue expenses in advance, accounting for about 6.5 percent; there are 26 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 83.9 percent; there is 1 case in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 3.2 percent; there are 2 cases in which the insurance company compensates personal injuries and property damage within the limit of liability, accounting for about 6.4 percent. Among 81 cases of compulsory traffic accident liability insurance in which the type of vehicle cannot match the driving license, or the driving license is not renewed, five types of judgments are as follows: there are 10 cases in which the insurance company only pays rescue expenses in advance, accounting for about 12.3 percent; there are 55 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 67.9 percent; there are 3 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 3.7 percent; there are 11 cases in which the insurance company compensates personal injuries and property damage within the limit of liability, accounting for about 13.6 percent; there are 2 cases in which the insurance company compensates personal injuries and property damage within the limit of liability and seeks reimbursement from the infringing party, accounting for about 2.5 percent. In more than 80 percent of the cases, the court holds that the liability of the insurance company is not limited to the advance payments of rescue expenses, but should also compensate the injured party for the loss.
In response to the problem mentioned earlier that the criteria of judgment are not unified, the Supreme People’s Court issued the Interpretation on Several Issues concerning the Application of Law in the Trial of Cases on Compensation for Damage in Road Traffic Accidents. According to article 18, if the insured has an insurance accident when drinking alcohol, driving without a license, driving the type of vehicle which cannot match the driving license, or not renewing the driving license, the insurance company underwriting the compulsory traffic accident liability insurance compensates personal injuries within the liability limit and can seek reimbursement from the infringing party. The reason for the change of the provisions is that the compulsory traffic accident liability insurance is a public product and should ensure that the injured party receives compensation in a timely manner, which is the public responsibility that the insurance company should undertake.
Reviewing the PKULaw database, the results of 300 cases of compulsory traffic accident liability insurance applied to the article show that the judgments of local courts are different (Table 2). Among 102 drunk driving cases of compulsory traffic accident liability insurance, three types of judgments are as follows: there are 28 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 27.5 percent; there are 35 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 34.3 percent; there are 39 cases in which the insurance company compensates personal injuries within the limit of liability and the infringer compensates the deficiency, accounting for about 38.2 percent. Among 149 cases of driving without a license of compulsory traffic accident liability insurance, three types of judgments are as follows: there are 63 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 42.3 percent; there are 32 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 21.5 percent; there are 54 cases in which the insurance company compensates personal injuries within the limit of liability, and the infringer compensates the deficiency, accounting for about 36.2 percent. Among 20 cases of drunk driving and driving without a license of compulsory traffic accident liability insurance, three types of judgments are as follows: there are 5 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 25 percent; there are 8 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 40 percent; there are 7 cases in which the insurance company compensates personal injuries within the limit of liability, and the infringer compensates the deficiency, accounting for about 35 percent. Among 29 cases of compulsory traffic accident liability insurance in which the type of vehicle cannot match the driving license, or the driving license is not renewed, three types of judgments are as follows: there are 8 cases in which the insurance company compensates personal injuries within the limit of liability and seeks reimbursement from the infringing party, accounting for about 27. percent; there are 11 cases in which the insurance company compensates personal injuries within the limit of liability, accounting for about 37.9 percent; there are 10 cases in which the insurance company compensates personal injuries within the limit of liability, and the infringer compensates the deficiency, accounting for about 34.5 percent.
To sum up the trial thought of the court, it seems that the infringer does not undertake the responsibility when the loss of the injured party does not exceed the limit of liability.6 Only when the loss of the injured party exceeds the liability limit, will the court divide the responsibilities of the insurance company and the infringer. With regards to the right of recourse, the court does not hold a positive attitude in the cases and the judgment does not explicitly respond to the issue under most circumstances. Certainly, if the insurance company files a lawsuit against the infringer to enforce the right of recourse, it can prevail on the whole. In addition, there are also many judgments that clearly deny the insurance company’s right of recourse. ‘In this case, the vehicle (Anhui 12/No.xxxxx) was insured at the Qihe branch in Dezhou of Yongan Property Insurance Company and the company’s obligation to compensate the third party He is a performance of contractual obligations. It has no factual and legal basis to file a claim against Shao Wei and Han Lei for reimbursement, so the court does not uphold the support.’
Despite the differences in the content of the two articles, the trial thought of the court are similar. In face of the insurance company and infringer, the insurance company should be responsible for the compensation of the injured party as much as possible. Although the judgment results of most cases deviate from explicit regulations of the provisions, it seems to be reasonable from the perspective of protecting the injured party in a weak positon. Protecting the interests of the weak is to demonstrate the public nature of insurance, however, what we have to face is that it objectively causes serious consequences of undermining the principle of insurance technology, which adversely affects the healthy operation of the insurance market. The reason is that the public nature and commercial nature cannot coordinate. It seems that people must make a choice between the two and the judge has to evade the legislation and basic discipline of insurance market operation to achieve the former.
B. The Contradiction at the Market Level
With regard to the trial thought of deviating from provisions to protect the weak, the insurance company and the insurance industry could have taken advantage of the contractual mechanism to guide the court to respect the market, but there are few consideration and actual effort. The most typical representation is the duty of disclosure, which refers to that where the insurer makes an inquiry when entering into an insurance contract, the insurance applicant shall tell the truth. According to article 16 of the Insurance Law of China, whether the insurance applicant is intentional or negligent and whether the uninformed or concealed fact has an impact on the insurer, the insurance applicant will confront severe consequences of rescinding the contract and refusing indemnification when identified as the violation of duty. Under the rigid provision, the court must make a choice between full indemnity and no indemnity. In judicial practice, to protect the insurance applicant and maintain the public nature of insurance, the court tends to deviate from provisions and neglect to identify the violation of insurance applicant, leading to the insurance company’s defeat in many cases. In this regard, the insurance company can completely mitigate the unfavorable situation through the design of insurance clauses. For example, if the violation situation of insurance applicant is not serious, the insurance company will not refuse to insure when knowing the truth, but change some clauses or increase the premium. The insurance company cannot terminate the contract but it can be considered that relevant clauses have been changed, or can request the insurance applicant to pay the premium retroactively, or indemnify in accordance with the ratio of actual paid premium and premium that shall be paid. It can ease the deadlock of unitary consequence of violating article 16 and the court can have more choices to seek the balance between public nature and commercial nature more rationally. Regretfully, few insurance companies put it into practice.
Moreover, the formulation of insurance liability in many insurance clauses has limitations, which leads to the difficulty in promoting various types of insurance with broad market space to a large extent. The market coverage rate of directors and officers liability insurance introduced in 2002 was only 5 percent. Apart from the defective legal system of civil liability, another important reason is that the design of insurance liability clause is unscientific. Taking the insuring clauses of most insurance companies as an example, it stipulates in the section of the liability of the spouse, heirs, agent or trustee of the insured that any claim first brought against any insured person’s spouse arising from a management act committed by the insured person during the insurance period by the third party, will be covered by the policy to the same extent as if the claim had been brought against the insured person. Any claim brought against any insured person’s heirs and legal representatives following the death, incapacity or bankruptcy of the insured person during the insurance period by the third party, will be covered by the policy to the same extent as if the claim had been brought against the insured person. A natural person is unable to go bankrupt according to the Enterprise Bankruptcy Law of China. In addition, the reimbursement liability of the insured company stipulates that if the insured company is requested by law or articles of incorporation to compensate the insured person for loss within the insurance liability in article 3, then the insurance company will pay such loss. However, the Company Law does not stipulate the reimbursement system of the company. Additionally, the design of the exemption clause may incur paradox and it is difficult to realize the reimbursement. The liability for the compensation of directors and senior executives of listed companies to shareholders and investors is mainly divided into two types: one is the liability for investors caused by insider trading behaviors; the other is the liability for investors’ loss caused by making false statements. According to the provisions of the Securities Law, both of them are illegal behaviors and basically classified as the exemption clause. As a result, the actual effectiveness of directors and officers liability insurance is quite limited, which greatly hinders the promotion effect. Another example is the environmental liability insurance. Since the pilot work began in 2007, it has basically been promoted by the government and enterprises have been reluctant to insure, causing lawsuits with the environmental protection departments frequently. In 2015, the amount of insurance fell by 20 percent. Due to the limitations of professional knowledge and technology, the product experience is not good, and the enterprise is not satisfied with the underwriting plan, claim procedures and loss ratio. For example, many insurance companies request the accident identification issued by the environmental protection department at or above the county level to continue the claim procedure. Many enterprises where minor accidents occurred have to abandon the indemnity for the fear of undertaking liability. The food safety liability insurance that started the pilot work in 2015 also suffered from awkwardness. From the perspective of its coverage, it is limited to the civil liability caused by the negligence or force majeure of the food enterprise and the liability risk of intentional illegal acts is excluded, which precisely requires decentralized management by insurance mechanism. In addition, some insurances with relatively good promotion effects also face operational difficulties, such as public place liability insurance, medical liability insurance, public liability insurance for natural disaster, animal liability insurance, etc., insurance companies are negligent in underwriting and even deny coverage.
The problems as mentioned earlier have already been attached importance in China’s policy and legislation. However, most of the existing policy and legislative documents only stipulate the public functions of liability insurance explicitly, but lack specificity and feasibility in how to achieve the coordinated development of public nature and commercial nature. Taking environmental liability insurance as an example, the Ministry of Environment reviewed and approved in principle the Measures for the Administration of Compulsory Liability Insurance for Environmental Pollution (Draft) on May 7, 2018, which further clarified the legal status of compulsory liability insurance for environmental pollution. Article 52 of the Environmental Protection Law stipulates that ‘The State shall encourage the purchase of environmental pollution liability insurance.’ It is determined as a policy insurance by local regulations or remains vagueness on account of no regulation. Moreover, what policy guarantees should be provided by government departments is not very clear. Another example is the fire public liability insurance. The Fire Protection Law stipulates that the State encourages enterprises to purchase and insurance companies to underwrite. The Notice on Actively Promoting Fire Public Liability Insurance and Strengthen Fire Prevention and Risk Management also proposes that government departments and insurance companies have duties and obligations to promote the fire liability insurance, but how to perform their duties and obligations is uncertain, and most of the regulations issued by local governments force to implement the insurance. The chaotic relationship between compulsory insurance and policy insurance, coupled with the lack of effective guidance and support from the government, further restrict the promotion and operation, which in turn causes the public function to be not fully realized.
Moreover, the relatively mature compulsory insurance also faces the contradiction between public nature and commercial nature at the policy level. The main performance is that the compulsory traffic accident liability insurance once confronted huge losses and is also required to increase the indemnity limit. Since its implementation, the compulsory traffic accident liability insurance has faced huge losses from 2006 to 2012. It has further caused problems that insurance companies violate legal requirements and refuse to insure high-risk vehicles such as buses, business trucks, motorcycles, tractors and trailers, etc. As for the direct cause of the loss of compulsory traffic accident liability insurance, the most criticized one is the unified formulation mechanism of premium rates. According to the current operating model, the government requires insurance companies to unify premium rates, prices and clauses and they have no right to decide. The ‘one size fits all’ approach is not fit for different actual situations and there is a disconnection with different actual risks. From this perspective, relying on investment has indeed eased the giant pressure on operating losses, but it has not really faced and solved the root causes of losses. Meanwhile, extremely low indemnity limit for compulsory traffic accident liability insurance has drawn particular criticism. According to the previous regulations, the indemnity limit for compulsory traffic accident liability insurance is only 60,000 yuan. From February 1, 2008, the indemnity limit for compulsory traffic accident liability insurance will be increased to 122,000 yuan. Specifically, if the insured motor vehicle is responsible for road traffic accidents, the indemnity limit for death and disability is 110,000 yuan, the indemnity limit for medical expenses is 10,000 yuan and the indemnity limit for property damage is 2,000 yuan. If the insured motor vehicle has no responsibility in the road traffic accident, the indemnity limit for death and disability is 11,000 yuan, the indemnity limit for medical expenses is 1,000 yuan and the indemnity limit for property damage is 100 yuan. Such indemnity level cannot meet the actual demand and call for increasing the limit upsurges.
Behind such contradictions is the dilemma that the public function of compulsory traffic accident liability insurance is difficult to achieve through commercial operations. At the government level, although it is hoped that compulsory insurance such as compulsory traffic accident liability insurance will perform powerful functions to maintain economic order and social stability as much as possible, the operation problems will still be solved by the market itself. In the long run, the lack of rational understanding of the latter tends to restrict the smooth development of the former.
III. THEORETICAL PROOF OF THE COORDINATION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE
From the above, it seems that contradiction between the public nature and commercial nature of China’s liability insurance are difficult to coordinate. We wonder if the relationship between the two remains so. Is it possible to achieve the coordination between public nature and commercial nature? If the answer is positive, is coordination a necessity? Is it feasible at the realistic level?
A. Noncontradiction between Public Nature and Commercial Nature
To clarify the relationship between public nature and commercial nature, we must first clearly define the connotation of public nature and commercial nature of liability insurance.
The commercial nature of liability insurance has no special meaning. As a member of the insurance family, liability insurance is a for-profit business operation, just like personal insurance and property insurance, which the commercial nature refers to. From the origin of liability insurance, the first ship owners’ mutual protection association founded in the UK in 1855 implementing the carrier liability insurance is actually a business behavior that gathers the liability risks of individual carriers and uses professional knowledge and technology to achieve profitability behavior. It includes various market links such as insurance actuary, clause design, marketing and risk management. It is also the operating principle of modern liability insurance.
The public nature of liability insurance mainly exists in the special context of its expanding function. At first, liability insurance mainly entered the market in order to spread the risk of the behavior of the insured. With the gradual improvement of the tort liability system, this kind of commercial behavior is emerging and takes effect in protecting the injured party with high efficiency at the realistic level. The biggest difference from the property insurance is that although it nominally provides services for the insured, ultimately the injured party acquire the insurance coverage. With the gradual enhancement of such function, liability insurance has gradually entered into the field of social governance, because protecting the injured party in a weak position is the indispensable requirement to maintain the basic order of society. The US is the most developed country in the liability insurance market. ‘Liability insurance pervades economic life in the US. Before Americans buy a cottage or a company, counsel a patient or a parishioner, design a product or provide a service, serve on the board of a corporation or a child-care center, drive a car or discipline a subordinate, we habitually consider both the possible attendant legal liability and how to insure against it.’ With the rise and development of environmental liability insurance, food safety liability insurance, public liability insurance, etc., the public function of modern liability insurance has been continuously expanded. From a macro perspective, it has become a necessary tool to assist and replace the government’s management of social risks. As the consensus reached by American scholars, we have gradually realized that living in such an era, private insurance organizations are playing a role of government.
In short, the public nature of liability insurance refers to the public demand for social risk dispersion and management. Its commercial nature mainly refers to the service supply that shares the loss. Commercial nature and public nature are not opposite. However, the key issue lies in how to make liability insurance perform the original social public function while maintaining long-term development of commercial profit. In fact, the development history of liability insurance is also precipitated with the expansion of public nature and improvement of commercial nature.
B. Necessity of Coordinating Public Nature and Commercial Nature of Liability Insurance
As a young member of the insurance family, the growth of liability insurance is quite circuitous, but the growth rate is rapid. Unlike personal insurance and property insurance, the history of liability insurance is questionable and controversial, but is also a legend with rapid development. The discipline behind is exactly that public nature and commercial nature are not contradictory and the coordination between the two is a necessity.
Liability insurance gives rise to a dispute over legality in the beginning. Opponents hold that it will weaken the civil liability function and trigger the crisis of the tort law. Before the 1780s, liability insurance was once in an illegal state. Then, with the US Breeden case establishing the validity of the liability insurance contract, the legitimacy of liability insurance system was gradually recognized by all parties. The reason is that policy is an effective way for the injured to receive compensation quickly and conveniently, just as the trial thought of the Missouri Supreme Court judge in this case. The insurance contract aims to achieve the fair value of legal system. Regarding doubts that lead to the employer’s bad behavior, it is impossible to simply conclude that the policy will definitely result in the negligent behavior of the actor. Actually, there is no clear evidence that moral hazard will be triggered. From the initial protection of the infringer to the current protection of the victim, the coordination between the public function and commercial operation of liability insurance is a significant basis for the legitimacy of such a system.
Then, the necessity of coordinating public nature and commercial nature is the basic driving force for the rapid development of the market in the past 100 years. Many modern insurances, such as environmental liability insurance, food safety liability insurance, safety production liability insurance, vaccine liability insurance, etc., have become financial instruments for the country to deal with important issues, because it involves not only the civil legal relationship at the micro level but also the national management issue at the macro level in many fields. The significance is not to solve infringement problems between the perpetrator and the victim, but more to conduct as an economic approach assisting the government in managing through the market operation. The characteristic of social public management of liability insurance has become more and more intense. Although it is a commercial operation that transfers risks for specific actors, it has already played a strong part in sharing responsibility for the national government. Daily life without liability insurance is beyond imagination. In the US, ‘some cities closed jails and suspended police patrols until insurance coverage was obtained. Parks and forest preserves were closed. Fourth of July celebrations were cancelled because of concerns over uninsured liability.’
To explore the development history of liability insurance, it is not difficult to find that the coordination between public nature and commercial nature is essential and of great significance. It not only determines the legal existence and development of liability insurance, but also the key that the government uses the mechanism to manage social risks and maintain social stability.
C. Feasibility of Coordinating Public Nature and Commercial Nature of Liability Insurance
The future of liability insurance has broad development space, and it is even regarded as a key growth point for the future insurance market. The reason is that in the past, the coordination between public nature and commercial nature was not only a necessity, but also has long-term feasibility in the present and the future. According to the statistics and prediction of Swiss reinsurance agency, although the US is not the birthplace of liability insurance system, it has already led the global market and will retain the lead position of the largest liability insurance market in the future. One of the important reasons is that the insurance coverage of public demand can be progressively expanded to risk fields that are closely related to the public interest, which is both a challenge and an opportunity for market operation. For a country, the development degree of liability insurance market will affect the development of the entire insurance market. Taking the US as an example, the US liability insurance market has seized the opportunity to achieve a leap-forward development, makes a breakthrough step by step in various fields such as motor vehicle liability, environmental liability, safety production liability, food safety liability, medical liability, and public liability. Since 2012, premiums (excluding employer liability insurance, third party liability insurance for the motor vehicle) have accounted for more than 30 percent of total commercial insurance premiums. The prosperity of the entire insurance market is closely related to the contribution of liability insurance. Looking back at China, although liability insurance has started for less than 40 years, it has already become the ninth largest liability insurance market in the world, and will further make a breakthrough in the future. It is also because China has taken many feasible measures to achieve the coordination of public nature and commercial nature in recent years and has strengthened and made a breakthrough in the security fields such as food, product, environment, fire, infrastructure, etc., providing a strong booster for the future development.
Professor Kenneth Abraham, an American scholar, proposed that modern insurance has four-dimensional concepts, which are contract, public welfare supervision, product and government governance. ‘The contract conception understands insurance as a voluntary agreement between an individual policyholder and an insurer, subject to the constraints and rules of construction that are ordinarily placed on such agreements by the law of contracts. This conception supplies the literal view of insurance to which the other conceptions, understood as metaphors or analogies, contrast themselves. Under the public welfare supervision conception, contracts are a mere tool for bringing the regulated relationship into existence. On this view, insurance is a cartelized industry selling a good sufficiently essential that it requires government regulation in the public interest. The product conception sees insurance as resembling a tangible good more than a promise to perform financial services and therefore appropriately subject to rules analogous to those that govern defectively designed products. The tort rather than the contract is the therefore core paradigm in this conception. Finally, the governance conception views insurance as a surrogate for the government in controlling behavior and protecting against misfortune, as well as an organizational arrangement among policyholders. These governance relationships create the risk of abuse by the insurer for its own ends and for the ends of the majority of policyholders at the expense of the minority. Ultimately, adopting a particular conception of insurance is no substitute for making or rejecting the normative choices that each conception entails. Going back at least to the legal realists, we have understood that it is not our concepts, but our political, economic and social values that underlie and underwrite legal doctrines and practices.’ It is especially true for liability insurance.
It can be said that the coordination between public nature and commercial nature is the indispensable requirement of the insurance system itself and can be realized through arrangements of the specific legal system, which also directly determines the development pace of future liability insurance. However, due to the serious lack of a legal system for liability insurance in China, the aforementioned contradiction has been further aggravated. The Insurance Law of China has only four provisions on liability insurance, which is far from meeting the realistic need of coordinating the relationship between public nature and commercial nature. The Interpretation IV on Several Issues concerning the Application of the Insurance Law has specific provisions on this, but there are still limitations. For example, there is a dispute over that ‘the insured is negligent in requesting’. According to article 15, as long as a third party can file a lawsuit, the court can regard that the insured is negligent in requesting. The provision indicates that if the people’s court accepts the case, it can be determined that the insured is negligent in requesting and the insurer will participate in the lawsuit. Although it can provide convenience for a direct claim of the third party, demonstrating the public nature to safeguard the rights and interests of the injured party, but brings a big challenge to business operation of the insurance company in practice. Therefore, how to make coordination of the two feasible is a major problem that must be solved in the future legal system.
IV. DIVERSIFIED STANDARD OF COORDINATING PUBLIC NATURE AND COMMERCIAL NATURE
The public nature and commercial nature of liability insurance should and can be achieved, and the standards at different levels are also different. At the judicial and market levels, the main performances are as follow.
A. Coordination between Protecting the Weak of Liability Insurance and Freedom of Contract
At the judicial level, the standard of coordination of public nature and commercial nature is reflected in the protection of the weak and the freedom of contract. From the perspective of protecting the weak, insurance consumers are in an absolutely weak position. They cannot increase, delete or change insurance clauses and have no negotiation space for contract clauses; compared with insurance companies, their economic strength and market information and professional knowledge are even more incomparable. The insurance contract relationship is unequal in essence and how to protect insurance consumers has long been the direction of improvement in modern insurance legal system. For example, the implementation of insurance disclosure obligation has experienced a change from active and infinite to passive and limited. From the perspective of contract freedom, the insurance contract is a format clause, which is a manifestation of the freedom of contract of insurance companies. The root cause lies in the maintenance of insurance operation technology. The feasibility of an insurance company to replace the early mutual protection society to maintain operation is to follow the principle of ‘balance of consideration’. It is because insurance is a subtle design based on objective laws, the insurance industry can be a specialized industry that provides risk protection for social life. Specifically, insurance companies should reflect such technical requirements when designing insurance products. Clauses of the entire insurance contract, such as the determination of premium rates, calculation of insurance accident losses, calculation of insurance indemnity and excluded liabilities, etc., must achieve a dynamic balance of consideration. Although the insurance clause is nominally the product of contract freedom of the insurance company, it is actually the externalization to maintain the insurance technology principle. Whether it is the protection of the weak or the freedom of contract, it should be the indispensable requirement of fairness in insurance transactions. The judicial judgement should focus on coordination of the two. Since it is actually a balance between the interests of the insured and the interests of the risk pool. Dating from the origin of insurance, the predecessor of the modern insurance industry is a risk pool of mutual cooperation, that is, to provide economic assistance for members suffering from specific disasters through organizing the fund of the mutual society. During the Roman Empire, there was common people class based on religious beliefs, as well as groups of soldiers, businessmen, workers, etc. When a member died, the group would pay a death benefit to the family to indemnify funeral expenses. It was not until the Middle Ages that the first for-profit commercial contractual insurance came about in Italy, which is the marine insurance. Then, property insurance by land and personal insurance were subsequently developed. From the ancient mutual assistance society to the modern business transaction, it is the insurance company that replaced the risk pool to undertake risks in fact. To explain further, the insurance company connects the individual risk with the risk pool by making a commercial contract with the individual policyholder and indemnifies the accidental loss of a few individual risks with the premium, that is, the apportioned amount of the risk pool. Moreover, the professional business operation of insurance companies allows the entire market to cope with risks, which overcome and break through the arbitrariness and limitations of private organizations’ remedies. Behind the insurance company is actually a risk pool of individual policyholders, which is especially true for liability insurance. Each policy appears to be the business behavior of a single consumer and an insurance company. The essence is the close relationship between the individual policyholder and the risk pool. In the field of liability risk with the characteristic of public nature, interests of the two should be highly compatible. In brief, the business conduct of an insurance company is actually a process in which the risk loss of a minority is shared by the majority through professional business practices and should be respected and recognized. It has already been deeply rooted in the countries where the insurance market is more developed. Due to the lack of insurance culture and limited marketing methods, the public image of insurance industry is not satisfactory, but it should not affect the positive meaning of liability insurance itself.
As Mr. Jiang Chaoguo said, ‘The interpretation of the insurance law not only protects the rights and interests of the insured person as much as possible, but also does not neglect the risk pool of the insurer. Only by following the development discipline can we achieve the legal meaning of fairness and justice and the freedom of substantive contract.’ Fairness of insurance transaction has dual meanings. On the one hand, it is necessary to protect the policyholder. On the other hand, it must maintain business skills that the insurer replaces the entire group to undertake risks, that is, to maintain the insurance technology principle contained in the insurance clause. For the judiciary, in the trial of cases, the freedom of insurance contract should be respected, whether it is legal plain text or market contents, because it is an inevitable requirement for protecting the insured party to truly achieve fairness in transactions. As mentioned earlier, China’s judicial judgment attaches great importance to the protection of the policyholder, so that the maintenance of insurance contract freedom is neglected in many cases. Even if the insurance contract and the legislation clearly stipulates, the court still requests the insurance company to bear the loss within the scope of the exemption. The reason is that the policyholders are often consumers in a weak position and in the individual case, they have suffered economic losses and the third party is in urgent need of compensation. Premiums are few compared with the huge amount of money for insurance companies, but they may be the basis of life for them. Based on the emotional logic that the weak need to be guaranteed, rather than the legal logic that they should be protected by law, the court has made judgments that object to contract freedom based on the starting point of protecting the weak. In fact, respect for freedom of contract is the proper meaning of achieving fairness in insurance transactions. Starting from the principle of insurance technology, if it is not supported and respected by the judiciary to protect the weak in the case, it means that a large number of additional risks that should not be borne by the insurance company will ultimately be paid by the insurance company and the damage is ultimately the interest of risk pool represented by the insurance company.
B. Coordination between Public Policy and Operation Technology
At the market level, the standard of coordination of public nature and commercial nature is reflected in that of public policy and operation technology. The main performance is that business operation technology can meet the demand of public policy to supply good products and maintain good operations. It explains why the US liability insurance can develop rapidly over a hundred years to a large extent. The reason why US liability insurance has accounted for 30 percent of the entire insurance market share as early as 2012 is that insurance operation technology is always in line with the growing public demand for infringement risk dispersion. Specifically, there are three aspects of manifestation.
First, developing plentiful types of insurance based on public demand, mainly involving the application of insurance actuarial technology. ‘Fortunately, when Americans ponder potential liability (as we are more prone to do than people in any other country), we usually discover an abundance of liability insurance companies ready and willing to sell coverage against an astounding array of legal liabilities. Then we often choose policies with liability limits in the hundreds of thousands or millions of dollars.’ In the liability insurance market in the US, the product system consisting of public liability insurance, personal liability insurance, professional liability insurance, third party liability insurance, product liability insurance, and employers liability insurance have long been formed. Not only limited to the demand of specific market participants, modern insurance companies tend to develop relevant insurance types according to public demand of the government’s governance, which also makes the market space of liability insurance larger and larger.
Second, designing insurance clauses according to the public demand. Take commercial general liability insurance as an example. Since 1939, the United States Insurance Service Agency has revised the clauses more than ten times. The goal of the revision is to balance the demand between expanding protection to meet public demand and rationally enacting exemption clauses to ensure the operation safety. As to the former, it is mainly to expand the coverage and limit conditions of deductibles. For example, in the revision of 2007, the clause of additional compensation was added and some of the liability exemption clauses in the grassland maintenance service guarantee order were removed. In the revision of 2013, the personal loss suffered by the inability to obtain electronic data that was originally within the scope of deductibles is included in the scope of compensation. As to the latter, the liability exemption clause is mainly set according to current insurance operation technology. For example, in the revision of 2013, the predictable and controllable risk of the insured (including expected or intentional injury, contract liability, etc.) was excluded; risks underwritten by other specific insurance (including workers compensation liability, employers liability, motor vehicle liability, aircraft liability, vessel liability, product recall liability, etc.) were separated, and huge uncertain risks were eliminated.
Third, controlling operation risks is a long-term guarantee for the realization of public demand. Apart from excluding the non-insurable risks through the exemption clause in the front, it is also necessary to carry out efficient operation and control of insurance funds at the back. Currently, the most general measures are reinsurance, insurance securitization, co-insurance and professional self-insurance. It can be concluded that no matter which link, business operations need to be highly compatible with the current public demand and provide the source of power. ‘Insurance companies cannot solely rely on the reform of tort law to achieve the best predictability. Instead, they should have a deeper understanding of the risks they insured and handle them effectively, through their own controllable procedures to realize better predictability.’
In addition to the power of the market itself, the important position of the government is self-evident, which is mainly manifested as policy support and market supervision. With the growth of public demand and the evolution of commercial operations, the modern liability insurance market raises higher requirements for policy support and market supervision. Policy support cannot be merely limited to traditional forms such as providing subsidies and exempting taxes and fees. Market restraint is not just on the simple level of mandatory requirements for premium rates and insurance types. Moreover, the two need to keep the pace of continuous innovation and simultaneous development to reach goals twice as fast with half the effort. According to the advanced experience of a foreign developed market, the government needs to undertake a number of functions, which can be basically classified into two categories: policy support and market supervision. One of the contents of policy support is to guide and disperse compensation risk, including but not limited to reinsurance and insurance funds, insurance guarantees, etc. Market supervision has also become more flexible. The EU has been implementing the solvency monitoring mechanism since 1994 and now it adopts Solvency II. Since 2015, China has also implemented a risk-based solvency assessment, China Risk-Oriented Solvency System (C-ROSS). The two are similar. In the development of liability insurance market, the role and function of government are diverse. The critical fact lies in how to ensure comprehensiveness and degree. The government needs to play every role, maintain the coordination of policy support and market supervision, and provide an ideal external environment for the market.
It is also worth mentioning that compulsory insurance has higher requirements for the coordination of policy support and market supervision. The public nature of compulsory insurance is more obvious. On the one hand, the intensity of policy support will be greater, and the typical performance is to support, guide and disperse compensation risk. One of the most important reasons is that many liability risks are inherently difficult to underwrite, because the amount of compensation is huge, which cannot spread the risk through market channels and must be realized through the government’s implementation of compulsory insurance. For example, the government provides the reinsurance, promotes the formation of joint insurance groups, establishes compensation funds and provides subsidies, etc. In many cases, these methods are mixed. On the other hand, the requirements for market supervision are also higher. In aspects of clause design and premium rate determination, insurers have less freedom and receive more restrictions on solvency supervision. It requires an effective connection between policy support and market supervision.
V. LEGAL COUNTERMEASURES FOR THE COORDINATION BETWEEN PUBLIC NATURE AND COMMERCIAL NATURE OF LIABILITY INSURANCE IN CHINA
A. Straighten Out the Relationship between the Liability Insurance Law and the Tort Liability Law
How to effectively explore the legal mechanism and countermeasures to realize the coordination of commercial nature and public nature of liability insurance according to the above criteria? First of all, the relationship between the liability insurance law and the Tort Liability Law should be straightened out. It is an inevitable requirement to realize the coordination between individual interests of the insured and the interests of the risk pool and between transaction fairness and contract freedom.
In the traditional sense, on the one hand, the Tort Liability Law is still the basis of the liability insurance law, which also explains very well that countries with a relatively complete tort legal system are often developed countries in the liability insurance industry. The public demand for modern liability insurance law is also derived from the improvement of the Tort Liability Law. On the other hand, the development of the liability insurance law can further promote the Tort Liability Law. The reason lies in the realization of public demand for commercial operations, based on the premise of ensuring the safety of the former. The US liability insurance crisis that broke out in the 20th Century is a cogent argument. If overemphasizing on public nature and ignoring commercial nature, it will not only lead to the imbalance situation, but also result in serious consequences of the lack of public nature.
In addition, modern liability insurance has developed a new trend and the content of protection has expanded from civil tort liability to livelihood risk and contractual liability. In recent years, China has implemented a number of non-infringement liability insurances, such as public liability insurance for natural disasters and wildlife public liability insurance, of which the insurance objects are not tort liability, but they are required to participate in social governance based on public nature. Take the public liability insurance for natural disasters as an example. It is insured by local governments. If the residents in the area are affected by storms, rainstorm, cliff collapse, lightning strikes, floods, tornadoes, squall lines, typhoons (tropical storms), tsunamis, mudslides, sudden landslides, hail etc., or because of the fall of flying objects and other airborne objects, forest fires, etc., or organized military operations coordinating with army during non-war time, or personal and property loss caused by rescue and relief work etc., the insurance company provides the compensation. Distinctive from the traditional liability insurance, the object of insurance is not a civil liability, more like the responsibility of national assistance. It is not in line with the provisions of China’s Insurance Law, but from the perspective of public nature, this type of insurance should have a legal status. Relevant legal provisions in the future should be adjusted accordingly. From this point of view, liability insurance has a tendency to break through the scope of tort liability. With regard to the phenomenon of liability insurance is not limited in tort liability, we admit and should rationally regard it from the perspective of coordinating public nature and commercial nature. To applaud for that the public nature of liability insurance is further expanded, we should carefully examine its impact on commercial nature.
Based on this, from both the ethical and judicial levels, we should regard the public nature and commercial nature of liability insurance as a unified goal. To be specific, at the ethical level, the improvement of future legal system should guide the public to form a rational understanding of the relationship between the individual interest and interests of the risk pool and eliminate the conceptual barriers to the commercial operation of liability insurance, especially since many types of insurance began to pay the bill for intentional violations, of which the moral risk should be reduced. In addition, focus on insurance trading convention to generate rational insurance ethics. At the judicial level, as mentioned above, the judge should be guided to respect the principle of insurance technology, because it constitutes the connotation of the fairness of insurance transactions together with the protection of the weak. More importantly, it should actively promote the improvement of legislation and inject the concept of coordinating transactions fairness and contractual freedom in the revision of legal provisions, to provide a win-win solution for dispute resolution.
B. Product Innovation on Liability Insurance
It can be seen from the above that the coordination of public policy and operation technology at the market level requires continuous improvement of business operation technology to meet public policy demand with the key point of product innovation. It can start from three aspects: insurance innovation, clause innovation and operation innovation.
Regarding to insurance innovation, it is necessary to use principles of insurance to actuate risks. For example, the rise of artificial intelligence technology has opened up an emerging blue ocean market for liability insurance. Taking the autonomous driving as an example, insurance companies in the UK have designed liability insurance products for automated vehicles. Then the UK took the lead in enacting the Automated and Electric Vehicles Act to specially regulate the insurance system of automated vehicles, clarifying important issues such as liability of insurers and the right of recourse. The Act came into effect on July 19, 2018. According to the provisions of the Act, where an accident is caused by an automated vehicle when driving itself on a road, if the vehicle is insured, the insurer is liable for that damage. If the vehicle is not insured, the owner of the vehicle is liable for that damage. However, the automated vehicle, goods carried in the vehicle, property in the custody or under control of the insured person and the person in charge of the automated vehicle are not in the range of liability. If the injured party or the driver is negligent, the insurer or the owner can reduce the relevant responsibilities according to the specific circumstances. After the insurer or the owner assumes responsibilities, they have the right of recourse to the third party who is responsible if the statutory conditions are met. The thought of ‘pay first and indemnify later’ can provide the best protection for the injured party, better meet the demand of maintaining the public interest and maximize the public nature. At the same time, in order to guarantee normal business operations, the Act also endows the insurers and manufacturers with negotiation space. For example, an agreement is reached on the issue of responsibility allocation beforehand. If the manufacturer refuses to assume the corresponding responsibility, the insurer can refuse to underwrite. Through such market supervision mechanism, manufacturers are encouraged to be more cautious and rational, which has a positive effect on the innovation and development of autonomous driving technology. It has positive reference significance for China. The improvement of the future legal system should fill the gap in this field and guide insurance companies to develop products in this emerging field.
Regarding the innovation of the clauses, it is mainly to improve the insurance clauses of the existing insurance. Even if it is a relatively mature foreign insurance, it must be combined with China’s actual situation to design. Taking China’s director and officers liability insurance as an example, an important reason for difficult promotion is to copy foreign clauses, which lacks feasibility. In the future, we should scientifically formulate liability exemption clauses while expanding the scope of coverage and then seek a balance between public nature and commercial nature.
Regarding business innovation, it is mainly to control business risks to ensure that current business practices can meet public demand to the greatest extent. Taking the more popular reinsurance as an example, the International Reinsurance Platform of Shanghai Insurance Exchange was launched on August 8, 2018. As one of the three important pillars of Shanghai insurance center, the construction of the reinsurance center has been promoted in-depth and requires a legal system to provide conditions. For example, the Singapore model can be used to ensure that the RMB can be exchanged and settled freely. In addition, a large number of reinsurance disputes are resolved through the Singapore International Arbitration Commission, which is the focus of future legal system improvement.
C. Proper Expansion of Compulsory Liability Insurance and Commercial Operation of Policy Liability Insurance
The realization of the coordination of policy support at government level and market supervision needs to be optimized simultaneously. For policy support, the typical performance is the expansion of compulsory liability insurance and the commercialization of policy liability insurance. With regard to compulsory insurance, comparing the EU and the US with China, in the market of the US, Britain, Germany, Italy and other countries, the fields of liability insurance such as motor vehicles, workers’ compensation, nuclear energy, aviation, shipping and some occupations etc., have been enforced. China’s compulsory insurance types are scarce and the implementation of more compulsory insurance types is an inevitable trend in the future, such as product liability insurance, employer liability insurance, fire public liability insurance and some environmental liability insurance. Concerning how the government provides policy support, in addition to providing subsidies and tax incentives, it can also refer to the agency operation mode of some states in the US according to the actual situation, that is, the government provides funds to entrust insurance companies to operate on their behalf and can also improve the information platform to facilitate accurate assessment and guidance of policyholder’s rational behavior to avoid declinature. With respect to policy insurance, it is a voluntary insurance, different from compulsory insurance. It basically adopts a business operation mode and policy support often enters the market by means of innovative business operation mode. For example, the Public-Private Partnership model establishes a long-term cooperative relationship between the government and the insurance company. The contract is concluded in accordance with the principle of equal negotiation. The insurer provides insurance products and the government pays consideration according to the actual effect. The two parties participate in the whole process with information symmetry to achieve more favorable outcomes than expected individual actions.
Regarding market supervision, as mentioned earlier, China is now implementing a risk-based solvency assessment, the C-ROSS, which mainly consists of three pillars: quantitative capital requirements, qualitative regulatory requirements and market restraint mechanism. This regulatory model has already preceded many developed markets to some extent. However, during the years of implementation, many problems have also been encountered. For example, the rationality of the admitted assets cannot be guaranteed. If the insurance company invests in non-standardized debt assets, on account of no open market, there is no reliable fair value. For example, it is possible to buy in a project at a low price, but the book value has increased by tens of times through evaluation; another example is the false capital increase. If the capital increase is not from the shareholders, but from insurance company’s own funds, make self-injection or false capital increase through the complex financial products and asset management plans and other means, then solvency supervision and capital constraints may be ineffective. These problems have also occurred in the implementation of the solvency standards of the EU, and excessive supervision is also likely to cause inefficient results that regulatory costs are greater than regulatory gains. The improvement of the future legal system should respond to these issues and provide the necessary institutional environment for China’s regulatory innovation.
VI. CONCLUSION
As a risk management approach in modern society, the public nature of future liability insurance will become more prominent. Especially in the field of artificial intelligence, it raises new requirements for the public functions of liability insurance and has created new legal issues. Under the circumstance that the determination of tort liability is in disputes, is the liability insurance still responsible for the public function of compensating the injured party? Can the public function of liability insurance exceed the disputes of tort liability and break through the limits of tort liability? How is the legal relationship between the parties involved defined? What are more remedies available to third parties? It is not only limited to autonomous driving, when the intellectual logistics system goes wrong and the property is lost, the intelligent robot causes injury in the work, etc., the uncertain determination of the tort liability often makes it more difficult for the injured party to acquire indemnity in time, and requires the liability insurance mechanism to protect it. Faced with such strong social demand, the connotation and extension of the public function of liability insurance will be greatly expanded, and the traditional basic theory will be challenged. At the ethical level, the rise of artificial intelligence will make the legal relationship among several parties in liability insurance complicated. Especially if the objects of liability insurance break through the limitation of tort liability in some cases and provide protection for the injured party, it will impact behavior motives of service providers and product producers of artificial intelligence. In addition, whether the behavior of artificial intelligence robots is affected by various subjective and objective factors as natural persons is still at the controversial stage and liability insurance may face a new ethical crisis. At the market level, artificial intelligence has brought revolutionary changes for traditional insurance operation technology such as actuarial methods. How can insurance companies carry out product innovation from the aspects of clause design, after sale service, and operational risk control to ensure that the growth speed of insurance technology keeps up with the actual demand of public functions in the era of artificial intelligence and achieve supply. At the policy level, certain risk areas in the era of artificial intelligence cannot rely solely on the commercial behavior of insurance companies, and require effective government intervention to ensure the realization of public functions of liability insurance. How to establish a government support mechanism to make certain uninsurable liability risks insurable and break through the limitations of operating technology in order to maximize the social public functions of liability insurance. What kind of support should the government provide, how to regard the relationship between compulsory insurance and policy insurance, how to construct a compulsory insurance system and a policy insurance system and how to implement efficient and flexible supervision? In the face of the series of new problems, how to eliminate ethical barriers at the ethic-oriented level through legal system improvement, improve market operation capabilities at the level of technological innovation and improve the feasibility and execution of public policies at the policy-based level? It has newer and higher requirements on the coordination between the public nature and commercial nature of future liability insurance. In this regard, we cannot ignore but should understand the current development trend thoroughly and optimize the legal system for the better future of liability insurance.
