Why do many households remain exposed to large exogenous sources 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. Demand is significantly price sensitive, but widespread take-up would not be achieved even if the product offered a payout ratio comparable to U.S. insurance contracts. We present evidence suggesting that lack of trust, liquidity constraints and limited salience are significant non-price frictions that constrain demand. We suggest contract design improvements to mitigate these frictions.

Technology-based ("FinTech") lenders increased their market share of U.S. mortgage lending from 2 percent to 8 percent from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20 percent faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby alleviating capacity constraints associated with traditional mortgage lending. In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so. We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. A basic research question for the study of micro-insurance markets is estimating the crosssectional determinants of household insurance takeup, and identifying the impediments to trade that prevent remaining households from participating. After describing the insurance product, we present empirical evidence on the determinants of insurance participation, based on a household survey implemented by ICRISAT and the World Bank in late 2004. We first evaluate takeup patterns against a simple neoclassical benchmark, which predicts that insurance participation is increasing in risk aversion and the variance of risk, and decreasing in basis risk between insurance payouts and the risk to be insured. We find some evidence consistent with the basis risk prediction; Terms of use: Documents in EconStor maynamely households who historically plant a high share of castor and groundnut, the two crops for which contracts are designed, are more likely to purchase insurance. Takeup rates are also higher amongst wealthy households, and lower amongst households identified as credit constrained. These findings are consistent with an extension of the 'benchmark' model to include borrowing constraints.Other evidence is more difficult to reconcile with the benchmark model. First, amongst the quantitatively most significant determinants of insurance takeup are variables measuring the household's degree of familiarity with the insurance vendor, such as whether the household is an existing BASIX customer. Participation is also higher amongst households that are members of the town Gran Panchayat (local council), and those that are connected to other village networks, especially when a larger number of other members or the household's primary network also buy insurance. Second, risk-averse households are somewhat less likely to take up rainfall insurance, 3 not more likely as the neoclassical framework would suggest. This result is concentrated amongst households who are unfamiliar with the vendor, BASIX, or do not use other types of insurance.We interpret these finding to suggest that many households are uncertain about the insurance product itself, leading risk-averse households, households with higher costs of evaluating new technologies, and households who are less familiar or place less trust in the insurance provider, to eschew purchasing insurance. This interpretation is also consistent with qualitative evidence: lack of understanding about the product was the most commonly cit...

Why do many households remain exposed to large exogenous sources 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. Demand is significantly price sensitive, but widespread take-up would not be achieved even if the product offered a payout ratio comparable to U.S. insurance contracts. We present evidence suggesting that lack of trust, liquidity constraints and limited salience are significant non-price frictions that constrain demand. We suggest contract design improvements to mitigate these frictions.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. A basic research question for the study of micro-insurance markets is estimating the crosssectional determinants of household insurance takeup, and identifying the impediments to trade that prevent remaining households from participating. After describing the insurance product, we present empirical evidence on the determinants of insurance participation, based on a household survey implemented by ICRISAT and the World Bank in late 2004. We first evaluate takeup patterns against a simple neoclassical benchmark, which predicts that insurance participation is increasing in risk aversion and the variance of risk, and decreasing in basis risk between insurance payouts and the risk to be insured. We find some evidence consistent with the basis risk prediction; Terms of use: Documents in EconStor maynamely households who historically plant a high share of castor and groundnut, the two crops for which contracts are designed, are more likely to purchase insurance. Takeup rates are also higher amongst wealthy households, and lower amongst households identified as credit constrained. These findings are consistent with an extension of the 'benchmark' model to include borrowing constraints.Other evidence is more difficult to reconcile with the benchmark model. First, amongst the quantitatively most significant determinants of insurance takeup are variables measuring the household's degree of familiarity with the insurance vendor, such as whether the household is an existing BASIX customer. Participation is also higher amongst households that are members of the town Gran Panchayat (local council), and those that are connected to other village networks, especially when a larger number of other members or the household's primary network also buy insurance. Second, risk-averse households are somewhat less likely to take up rainfall insurance, 3 not more likely as the neoclassical framework would suggest. This result is concentrated amongst households who are unfamiliar with the vendor, BASIX, or do not use other types of insurance.We interpret these finding to suggest that many households are uncertain about the insurance product itself, leading risk-averse households, households with higher costs of evaluating new technologies, and households who are less familiar or place less trust in the insurance provider, to eschew purchasing insurance. This interpretation is also consistent with qualitative evidence: lack of understanding about the product was the most commonly cit...