A reminder in the air: Attention to pollution and the purchase of critical illness insurance

34 Pages Posted: 21 Sep 2021

See all articles by Feng Gao

Feng Gao

Tsinghua University

Jaimie W. Lien

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics

Jun Wang

Tsinghua University - School of Economics & Management

Qian Wang

Beijing Technology and Business University

Jie Zheng

Tsinghua University - School of Economics & Management

Date Written: September 20, 2021

Abstract

How do environmental conditions influence the purchase of critical illness insurance, and why? The mechanism for any potential relationship between them has substantial welfare and policy implications. Prior literature has found a positive relationship between supplementary health insurance and pollution in selected major cities in China. By examining nationwide serious illness insurance purchases under fluctuating air pollution levels across 258 cities in China from 2012 to 2016, we confirm a robust positive relationship between air pollution levels and insurance purchase timing, which is in line with the prior finding. However, we further hypothesize and empirically test whether indicators of public attention drive this result. Localized internet search data shows that search frequencies for the “harmful effects of pollution” and related search terms are highly correlated with recent local air pollution levels. In addition, the level of news media coverage about air pollution sharply reduces the significance of the air pollution-critical illness insurance purchase relationship, showing that attention to pollution-related news drives this effect. The attention effect is also confirmed by comparing the influence of AQI variables as opposed to API, an earlier version of a pollution index which was not made widely available to the public. Furthermore, a survey of potential insurance consumers shows that current local air pollution does not influence individuals’ beliefs about future pollution in China, contributing to doubts about a projection-bias explanation of insurance purchase, previously discussed in the literature. Altogether, our evidence points to attention towards pollution as the primary reason for increased purchase of serious illness insurance during high air pollution time intervals.

Keywords: air pollution, critical illness insurance, attention, media, internet search

JEL Classification: G41, G52, I13, D83

Suggested Citation

Gao, Feng and Lien, Jaimie W. and Wang, Jun and Wang, Qian and Zheng, Jie, A reminder in the air: Attention to pollution and the purchase of critical illness insurance (September 20, 2021). Available at SSRN: https://ssrn.com/abstract=3926974 or http://dx.doi.org/10.2139/ssrn.3926974

Feng Gao

Tsinghua University ( email )

Beijing, 100084
China

Jaimie W. Lien (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics ( email )

Shatin, N.T.
Hong Kong

Jun Wang

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Qian Wang

Beijing Technology and Business University ( email )

No. 11/33, Fucheng Road, Haidian District
Liangxiang
Beijing, 102488
China

Jie Zheng

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

HOME PAGE: http://jzheng.weebly.com/

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