Economical Analysis And Experimental Study Of Insurance Consumption Selection Behavior In China

After the reform and open door policy, China has experienced a rapid development in the insurance industry. The market scale has been expanded, the insurance depth (percentage of insurance expense vs GDP) and insurance density (average insurance expense per person) has been increased. Insurance industry has been an important part in the national economy. But in fact, the development of China's life insurance is unbalanced. On one hand, the supply part dominates the market and the supply market is well developed. On the other hand, the consumption of life insurance is insufficient and the demand market is not well developed. To understand barriers for real demand and consumers' real behavior would be the keys to the development of China's insurance industry.This paper focus on the analysis and experimental study to verify Chinese consumer's insurance consumption behavior. On the basis, some useful suggestions are proposed for the management of insurance companies and for government policies and regulations.Firstly, the paper reviews the concepts and contents of bounded rational model and discusses the standards of consumer's decision-making. Development of uncertainty decision-making theory from the consumer's angle is discussed and assessed. The study of the paper is based on a more systematic combination of the characters of insurance consumption behavior. The paper also defines the nature of insurance and consumption from economic perspective. The finding is that insurance consumption selection is a value judgment and selection process under uncertain circumstance.Secondly, decision-making process of insurance consumption under the rational assumption is analyzed using the expected utility theory. Analysis is also made for the bounded rationality behavior of China's insurance consumption market. Assumptions are proposed based on the bounded rationality model of insurance consumption selection behavior in China. Based on literature review and survey analysis, it is found that experience dependency, value preference reverse and bank saving frame are existed in the insurance selection behavior process in China. Three experiments are designed and tested on the basis of some famous theories in behavior economics, such as experience dependency of risk recognition, value prefer reverse and bank saving frame. The analysis of the three experiments shows that the decision-making process of insurance consumption in China has clearly bounded rationality characters.According to the testing results, factors influence the bounded rationality model especially the traditional culture and institutional culture are discussed. Suggestions and operational advises are presented for insurance marketing so to help insurance industry to contribute more to the Chinese national economy.