Marketing Complex Financial Products in Emerging Markets: Evidence from Rainfall Insurance in India

Gaurav, Sarthak; Cole, Shawn; Tobacman, Jeremy

doi:10.1509/jmkr.48.spl.s150

Cited by 137 publications

(110 citation statements)

References 25 publications

(20 reference statements)

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Mentioning

106

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“…The prediction of De Nicola and Hill is in line with the findings of Clarke and Kalani (2011) 11 who indeed find that the demand for wealth is inverse U-shaped in the amount of wealth.…”

supporting

confidence: 88%

“…Panel data designs based on 9 annual household surveys of adopters and non-adopters to study adoption and/or impact are 10 less frequently applied. Randomised control trials of commercial insurance products are, with 11 some exceptions, rarely used. However, it should be noted that more recent studies on 12 insurance are able to move beyond stated preferences by conducting field experiments.…”

mentioning

confidence: 99%

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Adoption and impact of index-insurance and credit for smallholder farmers in developing countries

Marr

Winkel

Asseldonk³

et al. 2016

Agricultural Finance Review

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Purpose – The purpose of this paper is to review the most recent scientific literature on the determinants explaining the demand for index-insurance, the impact of index-insurance and the existing links between insurance and credit. In this meta-analysis, the authors identify key discoveries on the potential of index-insurance in enhancing credit supply for smallholders and thus farm productivity. Design/methodology/approach – Following a systematic literature search in Scopus and Web of Science, relevant empirical articles were identified by using the following criteria search algorithm: “insurance” and (“weather” or “micro” or “area?based” or “rain*” or “livestock” or “index”), and ((“empiric*” or “experiment” or “trial” or “RCT” or “impact”) or (“credit” or “loan*” or “debt” or “finance”)). The authors identified 1,133 related papers, 110 of which were selected as closely matching the study criteria. After removing duplicates and analysing each document, 45 papers were included in the current analysis. The framework for addressing insurance and credit issues, in the paper, entails three subsequent themes, namely, adoption of insurance, impact of insurance and links between insurance and credit. Findings – It is not confirmed yet that demand for insurance is indeed hump-shaped in risk aversion and the functional form of this relationship should be tested in more detail. This also holds for the magnitude of the effect of trust and education on actual demand. Furthermore, it is unclear to what extent other risk mitigation strategies form complements or substitutes to index-insurance. Lastly, the interaction between basis risk and price is important to the design of index-insurance products. If basis risk and price elasticity are indeed highly correlated, products that diminish basis risk are crucial in increasing demand. On the impact of bundled products, e.g. combination of insurance and credit, limited empirical research has been conducted. For example, it is unknown to what extent credit suppliers would react to the insured status of farmers or what the preferences of farmers are when it comes to a mix of financial products. In addition, several researchers have suggested that microfinance institutions or banks could insure themselves against covariate risk, yet no empirical evidence about this insurance mechanism has been conducted so far. Research limitations/implications – The authors based the research on scientific literature uploaded in Scopus and Web of Science. Other potentially insightful grey literature was not included due to lack of accessibility. Given the research findings, there is plenty of opportunity for further research particularly with regard to the effects of bundled products, e.g. insurance plus credit, on demand for index-insurance, supply of credit, loan conditions and impact on farm productivity and farmers’ well-being. Practical implications – Microfinance institutions, insurance companies, NGOs, research institutions and universities, particularly in developing countries, will be interested to learn about the systematic review of scientific research done in the area of insurance and credit for agriculture and the possibilities for application in their own practice of supplying these financial products. Social implications – A rigorous understanding of the potential of index-insurance and credit is essential for identifying the right mix of financial products that help smallholder farmers to increase farm productivity and their own well-being. Originality/value – The paper is valuable due to its rigorous evaluation of existing theoretical and empirical research around issues explaining the degree of adoption and impact of index-insurance and that of bundled financial products (i.e. index-insurance plus credit). The paper has the potential to become essential reading for academics, practitioners and policy-makers interested in researching and putting in practice the best options leading to greater farm productivity and well-being in developing countries.

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“…The prediction of De Nicola and Hill is in line with the findings of Clarke and Kalani (2011) 11 who indeed find that the demand for wealth is inverse U-shaped in the amount of wealth.…”

supporting

confidence: 88%

mentioning

confidence: 99%

Adoption and impact of index-insurance and credit for smallholder farmers in developing countries

Marr

Winkel

Asseldonk³

et al. 2016

Agricultural Finance Review

View full text Add to dashboard Cite

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“…Early papers examined adoption decisions (Giné et al 2010) and barriers to adoption , and found that trust, price reductions, and, to a lesser extent, financial education (Gaurav, Cole and Tobacman 2011;Dercon et al 2014;Cai and Song 2013) can drive adoption. Robust demand-side complementarities with other financial products have not been found.…”

Section: Introductionmentioning

confidence: 99%

Insuring farmers against weather shocks: evidence from India

Tobacman¹,

Stein²,

Shah³

et al. 2017

Self Cite

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The International Initiative for Impact Evaluation (3ie) is an international grant-making NGO promoting evidence-informed development policies and programmes. We are the global leader in funding, producing and synthesising high-quality evidence of what works, for whom, how, why and at what cost. We believe that better and policy-relevant evidence will help make development more effective and improve people's lives. 3ie impact evaluations3ie-supported impact evaluations assess the difference a development intervention has made to social and economic outcomes. 3ie is committed to funding rigorous evaluations that include a theory-based design, use the most appropriate mix of methods to capture outcomes and are useful in complex development contexts. About this report3ie accepted the final version of this report, Insuring farmers against weather shocks: evidence from India, as partial fulfilment of the requirements of grant OW3.1171 awarded under Open Window 3. The report has been formatted to 3ie standards. However, despite best efforts in working with the authors, some references are still missing and figures and tables could not be improved. We have copy-edited the content to the extent possible. These efforts caused a delay in publishing this report, which is why the series number and date are out of sequence.All of the content is the sole responsibility of the authors and does not represent the opinions of 3ie, its donors or its board of commissioners. Any errors and omissions are the sole responsibility of the authors. Please direct any comments or queries to the corresponding author, Jeremy Tobacman, at tobacman@wharton.upenn.edu Funding for this impact evaluation was provided by 3ie's donors, which include UK Aid, the Bill & Melinda Gates Foundation and the Hewlett Foundation. A complete listing of all of 3ie's donors is available on the 3ie website. SummaryWith weather risk a key source of income vulnerability for many of the 2.5 billion people around the world who derive their income from smallholder agriculture, rainfall insurance represents a potentially important product innovation.This study performs a rigorous evaluation of the long-term impacts of rainfall insurance access and coverage on agricultural investment and outcomes, consumption and wellbeing proxies using a randomised controlled trial design. Main findingsWe find no systematic, long-term effect of insurance access or adoption on agricultural investment decisions. There is also little to no statistical difference in reported agricultural revenues and profits. This is true even though (randomly assigned) subsidies caused households that purchased insurance policies to experience greater financial income from insurance payouts than financial costs from insurance premiums. These findings suggest that the insurance products studied were not sufficient to induce farmers to adopt theoretically promising alternative investments, such as high-yielding variety crops.Demand for rainfall insurance among study households was moderate. Depending on the...

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“…Wiedzę finansową można próbo-wać podnosić przez różne działania o charakterze edukacyjnym i w ten sposób stymulować popyt. Z przeprowadzonych eksperymentów wynika, że jest to skuteczne 49 . Warto tu zauważyć, że zaufanie i wiedza (finansowa) mogą być względem siebie substytucyjne.…”

Section: Wiedza Finansowaunclassified

Determinanty popytu na ubezpieczenia indeksowe w rolnictwie w świetle badań

Kaczała

2017

10.14746/rpeis

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W przypadku gospodarstwa rolnego występuje wysoka różnorodność zagrożeń mających w dużej mierze egzogeniczny charakter i cechujących się ograniczoną możliwością kontroli. Z tego względu dostęp do instrumentów pozwalających na finansowanie skutków materializacji tych zagrożeń ma znaczenie kluczowe, niezależnie od postawionego przez gospodarstwo celu (przetrwanie lub rozwój). Jednym z instrumentów kontroli finansowej są ubezpieczenia, w tym ubezpieczenia upraw.Ubezpieczenia upraw, niezależnie od rynku, na którym są oferowane, oparte były od początku na zasadzie odszkodowawczej, która stanowiła, że wypłaca-ne odszkodowanie pokrywało zaistniałą z umówionych przyczyn szkodę (przy czym, tak jak w innych rodzajach ubezpieczeń, dopuszczalne były różne formy ograniczania odpowiedzialności ubezpieczyciela). Ze względu jednak na wysoki poziom kumulacji ryzyka, problemy z dostępnością i wysoką cenę reasekuracji, poziom asymetrii informacji, skutkujący podwyższonym hazardem moralnym i motywacyjnym, a także kosztowną i wymagającą specjalistycznej wiedzy likwidację szkód, której towarzyszą liczne spory -koszty funkcjonowania tradycyjnych ubezpieczeń upraw były bardzo wysokie 1 . To zrodziło potrzebę poszukiwania innego sposobu konstrukcji umowy ubezpieczenia, któ-ra byłaby w mniejszym stopniu podatna na wymienione wcześniej problemy. W efekcie zastosowano do ubezpieczeń upraw indeks, który był już wykorzystywany w innych branżach (przede wszystkim energetycznej).Programy ubezpieczeniowe wykorzystujące ubezpieczenia indeksowe wprowadzono początkowo w Stanach Zjednoczonych i Kanadzie, a indeks dotyczył średniej wielkości plonów lub średniej wielkości dochodu z 1 ha upraw. Nieco później, gdyż pod koniec ubiegłego wieku, do produktów będących mikroubezpieczeniami i skierowanych do krajów rozwijających się zaczęto stosować także inne indeksy, tzw. pogodowe, które dotyczyły przede wszystkim wysokości opadów. W ciągu ostatnich 15 lat zainicjowano kilkadziesiąt programów pilo-1 W przypadku ubezpieczenia upraw typu multi-risk bądź o charakterze all risk gwarantowanych przez państwo uproszczony wskaźnik szkodowości kształtował się w różnych okresach lat 1970-1980 w USA, Indiach, Brazylii, Kostaryce, Japonii, Meksyku i na Filipinach w granicach od 2,6 do 5,74. J. Skees et al., New approaches to crop yield insurance in developing countries, EPTD

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Marketing Complex Financial Products in Emerging Markets: Evidence from Rainfall Insurance in India

Cited by 137 publications

References 25 publications

Adoption and impact of index-insurance and credit for smallholder farmers in developing countries

Adoption and impact of index-insurance and credit for smallholder farmers in developing countries

Insuring farmers against weather shocks: evidence from India

Determinanty popytu na ubezpieczenia indeksowe w rolnictwie w świetle badań

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