Barriers to Household Risk Management: Evidence from India
Why do many households remain exposed to large exogenoussources of non-systematic income risk? We use a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. We find demand is significa...
| Main Authors: | , , , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group,
2012-10-04T14:53:23Z.
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| Subjects: | |
| Online Access: | Get fulltext |
| Summary: | Why do many households remain exposed to large exogenoussources of non-systematic income risk? We use a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. We find demand is significantly price-elastic, but that even if insurance were offered with payout ratios similar to US, widespread coverage would not be achieved. We then identify key non-price frictions that limit demand: liquidity constraints, particularly among poor households, lack of trust, and limited salience. We suggest potential improvements in contract design to mitigate these frictions. Switzerland. State Secretariat for Economic Affairs Global Association of Risk Professionals Bill & Melinda Gates Foundation (Consortium on Financial Systems and Poverty grant) |
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