Air pollution and household commercial insurance purchasing behavior

This study matches household data from the China Household Finance Survey (CHFS) with city-level air quality index data to examine the causal effect of air pollution on households' commercial insurance purchasing behavior. We find that air pollution significantly increases the likelihood of purchasing commercial insurance. To address endogeneity concerns, we adopt an instrumental variable approach using the ventilation coefficient and implement a regression discontinuity design based on China's Huai River policy. Mechanism analysis reveals that air pollution influences insurance demand through two channels: heightening household perception of potential risks associated with air pollution and increasing household spending on smog protection and medical care. Heterogeneity analysis indicates that the effect is more pronounced among households with high financial literacy, those at the parenting and retirement stages of the family life cycle, those with high social trust, and those residing in areas with limited access to medical resources. In addition, households tend to prefer life insurance products that provide stronger protection without requiring principal repayment in response to air pollution. These findings offer meaningful insights for the innovation and development of commercial insurance products.