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Do disaster experience and knowledge affect insurance take-up decisions?

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  • Cai, Jing
  • Song, Changcheng

Abstract

This study examines the effect of experience and knowledge on weather insurance adoption. First, we conduct insurance games with farmers, and find that the treatment improves real insurance take-up by 46%. The effect is not driven by changes in risk attitudes and perceived probability of disasters, or by learning of insurance benefits, but is driven by the experience acquired in the game. Second, we find that providing information about the payout probability has a strong positive effect on insurance take-up. Finally, when subjects receive both treatments, the probability information has a greater impact on take-up than does the disaster experience.

Suggested Citation

  • Cai, Jing & Song, Changcheng, 2017. "Do disaster experience and knowledge affect insurance take-up decisions?," Journal of Development Economics, Elsevier, vol. 124(C), pages 83-94.
    • Handle: RePEc:eee:deveco:v:124:y:2017:i:c:p:83-94
    DOI: 10.1016/j.jdeveco.2016.08.007
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    More about this item

    Keywords

    Insurance; Take-up; Game; Experience; Knowledge;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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