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Tuesday, August 3 • 9:00am - 10:30am
3D3 Does Investment-Induced Stress Drive Demand for Health Insurance?

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Jainren Xu, University of North Texas; Yu Shen, Southwestern University of Finance and Economics; Xian Xu, Fudan University

The volatile stock market leads to substantial mental stressors among investors that adversely affect their health. Using proprietary transaction-level, high-frequency data from a large insurance company, we find that daily stock market fluctuations drive the contemporaneous sales of new health insurance policies and the sales increase with similar magnitudes when the market rises or declines. We also find that the effect of market fluctuations on insurance demand is stronger among populations with higher household investment ratio and with higher income. The distributed lag model shows that the increased insurance demand during market fluctuations is an intertemporal substitution so that the market movements affect when but not whether individuals purchase insurance. The mechanism tests indicate that when the market becomes volatile, the press media covers more incidents or anecdotes of stress-induced diseases, including hospitalization and death, which leads to an upsurge in related keywords searches in the search engine. It demonstrates that individual attention to health issues associated with investment-induced stress increases in response to salient news. We explore economic explanations for our results and, given the pre-existing condition and the waiting-period provision by the insurer (i.e., policy not effective until months after the purchase), we find support for salience theory.

avatar for Katja Hanewald

Katja Hanewald

Senior Lecturer, UNSW Sydney, School of Risk & Actuarial Studies

avatar for Jianren Xu

Jianren Xu

University of North Texas

Tuesday August 3, 2021 9:00am - 10:30am EDT

Attendees (9)