Patterns of Rainfall Insurance Participation in Rural India
This paper describes the contract design and institutional features of an innovative rainfall insurance policy offered to smallholder farmers in rural India, and presents preliminary evidence on the determinants of insurance participation. Insuranc...
| Main Authors: | , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/11/8738363/patterns-rainfall-insurance-participation-rural-india http://hdl.handle.net/10986/7646 |
| Summary: | This paper describes the contract design
and institutional features of an innovative rainfall
insurance policy offered to smallholder farmers in rural
India, and presents preliminary evidence on the determinants
of insurance participation. Insurance takeup is found to be
decreasing in basis risk between insurance payouts and
income fluctuations, increasing in household wealth and
decreasing in the extent to which credit constraints bind.
These results match with predictions of a simple
neoclassical model appended with borrowing constraints.
Other patterns are less consistent with the
"benchmark" model; namely, participation in
village networks and measures of familiarity with the
insurance vendor are strongly correlated with insurance
takeup decisions, and risk-averse households are found to be
less, not more, likely to purchase insurance. We suggest
that these results reflect household uncertainty about the
product itself, given their limited experience with it. |
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