Cheng Wan, Hazel Bateman, Hanming Fang, and Katja Hanewald
Abstract: In many low- and middle-income countries, social insurance provides basic pension benefits with limited cover for illness and care costs, while private insurance markets are underdeveloped. Using an online survey of retirement insurance choices in urban China, we explore the stated demand for longevity, critical illness and long-term care (LTC) insurance. Most preferred is critical illness and LTC insurance cover for 50% of the expected out-of-pocket costs, and a monthly annuity of around 20% of average urban disposable income. We find that access to critical illness and LTC insurance can release precautionary savings for the purchase of annuities. Better product knowledge, higher financial competence, stronger bequest motives, and lower risk tolerance are linked to higher demand for critical illness and LTC cover but lower demand for annuities. Our results inform the development of retirement insurance markets in countries with ageing populations and gaps in social and private insurance.
Keywords: long-term care insurance, critical illness insurance, annuities, financial competence, risk aversion, health care
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