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Air pollution and defensive behavior: Evidence from transaction data in China
1School of Finance, Southwestern University of Finance and Economics, Chengdu, Sichuan, China.
Higher air pollution (AQI) drives health insurance purchases, especially when AQI exceeds 200. This defensive behavior, linked to health awareness, represents a significant annual income cost.
Area of Science:
- Environmental health
- Health economics
- Behavioral economics
Background:
- Air pollution poses significant health risks globally.
- Understanding public response to environmental hazards is crucial.
- Health insurance is a key financial tool for managing health risks.
Purpose of the Study:
- To empirically investigate the relationship between air pollution and health insurance purchases.
- To quantify the impact of air quality index (AQI) on insurance sales.
- To explore the underlying drivers of this defensive behavior.
Main Methods:
- Utilized transaction-level data from a major Chinese insurance company (2014-2018).
- Analyzed over half a million insurance contracts across nineteen cities.
- Employed econometric analysis to determine the correlation between AQI and insurance sales.
Main Results:
- A 10% increase in AQI correlates with a 0.37% rise in daily health insurance sales.
- The effect of air pollution on insurance purchases is non-linear, intensifying above AQI 200.
- The estimated annual defensive cost of air pollution is approximately 1.70% of individual income per unit AQI increase.
Conclusions:
- Air pollution significantly influences health insurance purchasing decisions.
- Health management awareness and social interaction are key drivers of this behavior.
- Findings highlight the economic burden of air pollution on individuals and the insurance market.
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