Risk Communication Clarity and Insurance Demand: The Case of the COVID-19 Pandemic

Abstract

We study how the clarity of COVID-19 risk communications affects COVID-19 insurance demand using proprietary prefecture-level insurance data from China. We find that when local disclosures of COVID-19 risk contain case origin information, local purchases of COVID-19 insurance and local Internet searches for COVID-19 information increase, even after controlling for newly confirmed local cases and new deaths. Our results are robust to using the disclosure clarity of a major neighboring city. The findings suggest that providing improved knowledge about risk to individuals lead them to engage in more risk management. Our evidence contributes to the debate over how risk communication affects individuals’ risk-related behaviors.