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The corporate governance system of the insurance industry in Taiwan, which holds board members fully responsible for cases of bankruptcy, offers an interesting environment in which to explore its unique regulatory impact on insurers' efficiency. Using a unique panel data from Taiwan, this paper investigates whether corporate governance variables -including insider ownership, voting rights, cash-flow rights, and board composition -influence the efficiency performance of insurance companies. The analysis suggests that a high concentration of voting rights and cash-flow rights in controlling shareholders' ownership has prevailed in Taiwan's insurance industry. Our overall evidence shows that corporate governance plays an important role in influencing efficiency for property-liability insurers in Taiwan. Specifically, insider ownership, cash-flow rights, and the presence of outside directors have positive impacts, whereas concentrated ownership, deviation between voting rights and cash-flow rights, board size, and the presence of CEO duality have negative impacts on insurers' efficiency.

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Using information on timing and number of claims in a unique data set pertaining to comprehensive automobile insurance with the increasing deductible provision in Taiwan, the authors provide new evidence for moral hazard. Time-varying correlations between the choice of the insurance coverage and claim occurrence are significantly positive and exhibit a smirk pattern across policy months. This empirical finding supports the existence of asymmetric information. A subsample estimation depicts insured drivers' significant responses to increasing deductibles, which implies the existence of moral hazard. According to the probit regression results, the increasing deductible makes policyholders who have ever filed claims less likely to file additional claims later in the policy year. The empirical findings strongly support the notion that the increasing deductible provision helps control moral hazard. Copyright (c) The Journal of Risk and Insurance, 2008.