Social Trust and Household Participation in Commercial Insurance in China: A Literature Review

Whether households participate in commercial insurance depends largely on whether the household believes that the insurance company will fulfill its promise in the future. Social trust is the source of this belief. It is related to the household’s judgment of transaction costs, risks and information environment, and also directly affects the popularity of long-term financial products. In the past two decades, China’s premium income has increased from less than 160 billion yuan in 2000 to more than 5 trillion yuan in 2023. The speed of supply expansion is very fast, but the proportion of households actually participating in insurance is still low, and there are only 0.9 commercial health insurance policies per capita. Supply is rising, and demand is not keeping up. This contrast is worth finding the answer from the decision-making psychology of the household. Although the existing studies have repeatedly mentioned social trust, there is a lack of a unified statement on its connotation and measurement caliber. Most studies only regard it as a control variable or a regulating variable, and there is not much work to systematically sort out the mechanism of action and heterogeneity. In view of this gap, this review first defines the meaning of social trust, distinguishes its relationship with trust and social capital, and then introduces the main methods of measuring social trust in the academic community, and then summarizes the three channels of social trust affecting insurance decision-making, that is, reducing transaction costs, changing risk perception, and transmitting information with the help of acquaintance networks, and examining the differences between insurance types, regions and income groups. The result of the literature review is that social trust generally has a positive effect on participation in commercial insurance, but this effect is not uniform, and the inconsistent measurement caliber and insufficient treatment of endogeneity also weaken the comparability of existing conclusions. This review provides a relatively complete analytical framework for understanding the low participation of Chinese households in commercial insurance.