The Study of Construction Inherent Defect Insurance Based on Market Supply

Abstract

The Inherent Defect Insurance is one kind of commercial insurance and one of the important economic methods to provide protection for the final buyers of the buildings in some developed countries worldwide. The experience of the IDI in other counties indicates that the IDI can reduce the inherent defects of the building and protect the clients free of lost from the inherent defects and damages. According the Legal Status of insurance, there are two kinds of insurance. One is compulsory insurance, the other is non compulsory. The practice of the IDI was carried out in some selected cities in China from 2005. But it did not work well. One of the main reasons is that there are no qualified IDI clauses supplied. In order to make clear of the reason of market supply shortage, the unformatted questionnaire and formatted questionnaire were designed. And an economic model was used to analyze the theoretical reasons of market failure. In view of government regulation, some useful policy suggestions of the development of IDI in China were given.