Social Credit System Reform and Commercial Insurance Purchase: Evidence from China

Can social trust promote commercial insurance purchasing behavior? By utilizing four waves of the China Labor-force Dynamic Survey (CLDS) data, we find that the construction of the Social Credit System Project (SCSP) in China significantly increases the probability of individuals purchasing commercial insurance. SCSP influences residents’ insurance purchasing decisions by enhancing the regional credit environment. Further heterogeneity tests indicate that our findings are more pronounced in individuals with higher education and non-agricultural household registration, and those not covered by social insurance. In addition, the policy enhancement effect of commercial insurance is stronger in regions where traditional culture is less prevalent and internet development is better. This study helps to understand the role of formal institutions in promoting the development of insurance markets.