Does inequality perception affect commercial insurance purchase? Evidence from household survey data in China

This is the authors' abstract. We don't add key points for this paper.

Commercial insurance is an important tool for households to manage risk. However, the impact of inequality perception on commercial insurance purchase remains complex and requires further exploration. This article uses data from the 2012–2020 China Family Panel Studies (CFPS) to examine how inequality perception influences households’ commercial insurance purchase. Employing a two-way fixed effects model, we find that households with higher inequality perceptions are more likely to purchase commercial insurance and spend more on premiums. This effect is driven by two factors: increasing risk perception, which encourages insurance purchases, and reducing social capital, specifically informal risk-sharing, which motivates commercial insurance purchase. Heterogeneity analysis shows this effect is particularly pronounced among households with lower subjective socioeconomic status (SES) but higher objective SES, downward SES perception bias, and regions with lower insurance and economic development. These findings provide new perspectives on the simultaneous expansion of inequality and the increasing commercial insurance demand in China.