An Empirical Analysis of Social Capital and Household Insurance Purchases in the Context of the Internet of Things: Evidence from China

Abstract

The Internet of Things has entered customers' everyday lives around the globe and transformed business models across industries. This environment brings opportunities for insurers: to develop new products, open new distribution channels, and extend their role to include prediction, prevention, and assistance. Although the Chinese insurance business ranks second in the world, the participation rate of residents in the insurance market still lags far behind that of other countries. In Chinese society, where "guanxi"is omnipresent, social capital has a profound influence on household activities. However, there is a lack of research linking social capital and household insurance purchases. Based on a dataset from the 2017 China Household Finance Survey (CHFS), this article examines the impact of social capital on household insurance purchases in China. A new social capital indicator is constructed by incorporating online interaction into the measurement of household social capital. The results of the Probit and Tobit model analysis indicate that social capital has a significant positive impact on both the probability and the proportion of household insurance purchases. The results remain robust after changing the model, measurement, and sample of the study, and using instrumental variables. This article provides new evidence for the relationship between social capital and household insurance purchases, and enriches the research perspective on insurance purchasing decisions.