Medical insurance, health risks, and household financial asset allocation: evidence from China household finance survey

There is a lack of micro evidence on whether medical insurance may optimize the household financial asset allocation by transferring health risk, despite the fact that health risk is a significant component driving families’ precautionary savings. This article empirically examines the impact of health risk and social medical insurance on household risky financial asset allocation using a Probit model, based on data from the 2015–2019 China Household Finance Survey (CHFS). The findings indicate that social medical insurance, with its lower level of security, reduces the likelihood, but it can alter households’ preferences for risk by lowering marginal effect of health risk. According to the findings of the heterogeneity analysis, people who live in rural and less developed areas are more likely to experience the risk-inhibiting effects of social medical insurance and health risk. The eroding and risk-suppressing impacts of social medical insurance are likewise less pronounced for households headed by women and older people, as is the health risk’s suppressive influence on household involvement in risky financial markets. Compared with social medical insurance, commercial medical insurance with a higher level of coverage can dramatically increase household participation in riskier financial markets. This article provides micro-empirical evidence for the household asset allocation effect of medical insurance.