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Dynamics of Demand for Rainfall Index Insurance: Evidence from a Commercial Product in India

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  • Daniel Stein

Abstract

This paper analyzes the dynamic nature of rainfall insurance purchasing decisions. Customers of the Indian microfinance institution BASIX who receive an insurance payout are 9 to 22 percentage points more likely to purchase insurance the following year. This effect cannot be satisfactorily explained by trust, learning, or direct effects of weather, leading to the conclusion that it is driven by behavioral effects. Overall, low repurchasing rates even after payouts suggest that the studied rainfall index insurance products are likely to continue struggling to achieve significant sales at market prices.

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  • Daniel Stein, 2018. "Dynamics of Demand for Rainfall Index Insurance: Evidence from a Commercial Product in India," The World Bank Economic Review, World Bank, vol. 32(3), pages 692-708.
    • Handle: RePEc:oup:wbecrv:v:32:y:2018:i:3:p:692-708.
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    File URL: http://hdl.handle.net/10.1093/wber/lhw045
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    4. Takahashi, Kazushi & Noritomo, Yuma & Ikegami, Munenobu & Jensen, Nathaniel D., 2020. "Understanding pastoralists’ dynamic insurance uptake decisions: Evidence from four-year panel data in Ethiopia," Food Policy, Elsevier, vol. 95(C).
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    6. Moritz, Laura & Kuhn, Lena & Bobojonov, Ihtiyor & Glauben, Thomas, 2021. "Adopting Index Insurance and/or Precautionary Savings: Peer Effects in Complex Decision-Making in Uzbek Experiments," 2021 Conference, August 17-31, 2021, Virtual 315266, International Association of Agricultural Economists.
    7. Kramer, Berber & Porter, Maria & Wassie Bizuayehu, Solomon, 2023. "Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia," 2024 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2024, San Antonio, Texas 339075, Agricultural and Applied Economics Association.
    8. Kirchner, Ella & Musshoff, Oliver, 2022. "Client satisfaction and product understanding as drivers for insurance renewal – A case study in Mali," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321216, Agricultural Economics Society - AES.
    9. Yuyuan Che & Hongli Feng & David A. Hennessy, 2020. "Recency effects and participation at the extensive and intensive margins in the U.S. Federal Crop Insurance Program," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 52-85, January.
    10. Qingxia Wang & Yim Soksophors & Angelica Barlis & Shahbaz Mushtaq & Khieng Phanna & Cornelis Swaans & Danny Rodulfo, 2022. "Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers," Sustainability, MDPI, vol. 14(21), pages 1-17, November.
    11. Mogge, Lukas, 2023. "A District-Level Analysis of the Effect of Risk Exposure on the Demand for Index Insurance in Mongolia," Ruhr Economic Papers 1018, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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