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| Household Size Miniaturization and Commercial Insurance Demand: Impacts, Transmission Channels and Evolution Trends |
| ZHAI Guangyu, XUE Yankai
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| School of Finance, Dongbei University of Finance and Economics; PBC School of Finance, Tsinghua University |
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Abstract Population development is a strategic national issue. In advancing the “modernization with a huge population,” miniaturization of household size has become a key feature of China’s demographic evolution. According to the Seventh National Population Census, the average household size in China has declined to 2.62 persons, falling below the long-standing threshold of three persons. This structural shift implies a weakening of the family’s traditional intergenerational support and risk-sharing functions, and profoundly reshapes the underlying logic behind residents’ demand for commercial insurance as a risk management tool oriented toward social mutual aid. Therefore, examining the causal relationship between household miniaturization and commercial insurance demand is essential for understanding household financial behavior, enhancing risk resilience, and improving a multi-tiered social security system.
Accordingly, this paper examines the impact of household size variation and the trendof miniaturization on commercial insurance demand. To address the divergence in existing literature regarding linear relationships, we construct a nonlinear theoretical framework based on the interplay between the “wealth threshold” effect and “altruistic motivation,” proposing an inverted U-shaped hypothesis for the relationship between household size and insurance demand. Empirically, we adopt a combined macro-micro strategy, utilizing provincial panel data (2000–2023) to capture aggregate trends and China Family Panel Studies (CFPS) data (2010–2022) to identify household-level characteristics. Our methodology employs Two-Way Fixed Effects models alongside IV-Probit and IV-Tobit models. To address endogeneity concerns arising from reverse causality, we construct instrumental variables based on lagged divorce rates, exogenous family structure shocks, and fertility policy implementation, thereby ensuring robust and reliable estimation results.
The findings reveal a significant inverted U-shaped relationship between household size and commercial insurance demand, with the inflection point located within the rangeof 3 to 4 persons. Specifically, the demand of miniaturized households significantly exceeds that of non-miniaturized ones, a conclusion that holds after thorough endogeneity treatment and a series of robustness checks. Mechanism analysis identifies two synergistic channels: “strengthening risk protection motivation” and “enhancing household investment capacity,” which demonstrate a transmission logic where motivation drives capacity, and capacity in turn supports motivation. Heterogeneity analysis indicates that the promoting effect of miniaturization strengthens with the householder’s age during mature family stages but weakens in the aging stage. Furthermore, the impact is more pronounced for urban households, households with higher education, and those with better social security coverage. Importantly, the trend toward “individual living” may attenuate the promoting effect of household miniaturization, potentially fostering high-risk solitary households that lack insurance coverage.
Based on the research conclusions, we propose three policy recommendations. First, advance supply-side structural reform of insurance products to accurately meet the full lifecycle needs of miniaturized households. Second, implement tiered policies to address differentiated protection gaps, focusing on the risk exposure of rural, less-educated, and solitary households. Third, strengthen the institutional synergy between “basic social security” and “inclusive commercial insurance”, so as to achieve precise alignment between insurance services and different types of households at their respective development stages.
The marginal contributions of this paper are threefold. First, the research explores a new and timely area. While existing literature predominantly examines household structure from a sociological perspective, this paper employs an economic perspective.Using recent macro-micro data and a nonlinear analytical framework, it identifies the causal effect between household size (primarily its miniaturization trend) and insurance demand, thereby enriching existing research and providing more explanatory theoretical logic and empirical evidence. Second, it deepens the research on transmission mechanisms of miniaturization. Beyond empirically verifying the “strengthened protection motivation” channel, it innovatively identifies the “enhanced investment capacity” pathway and analyzes their synergistic interaction, thus refining the logical chain of how household miniaturization affects commercial insurance demand. Third, it systematically enhances the analytical dimensions. By integrating age structure, family structure, and social security levels into a unified framework, it explores the heterogeneous impacts of household miniaturization, particularly highlighting the effect of the solo-living trend on insurance demand. This provides policymakers with specific pathways to address demographic changes and to optimize a lifecycle-aligned social security system, ensuring an organic alignment between theoretical analysis and policy orientation.
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Received: 14 October 2024
Published: 01 April 2026
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