INDEX INSURANCE TO MANAGE WEATHER RISK – A LONG-TERM EXPERIMENT IN GUJARAT

Principal Investigators: Shawn Cole (Harvard Business School), Jeremy Tobacman (Wharton University), Peta Topalova (IMF) and Raghab Chattopadhyay (IIM Calcutta)
Research Team: Niriksha Shetty and Thomas Van Den Aarssen
LEAD Centre: Centre for Microfinance (CMF)
Focus Area: Insurance & Pensions
Project Geography: Gujarat, India
Partner: Self Employed Women’s Association (SEWA)
Status: Ongoing

Background:

The study evaluates the rainfall index insurance product that could help farmers hedge against agricultural losses due to excess or deficit rainfall, which is often cited as the largest risk to agricultural households. The insurance product has been marketed and distributed by the Self Employed Women’s Association (SEWA). In addition to the village-level random variation in access to the insurance, incentives and information relevant for purchase choices are randomized at the individual level. The first incentive manipulation implemented was a price discount, to estimate the elasticity of demand. The data will prove much richer in understanding the demand curve for weather insurance, as well as the degree to which previous experience with the product, and previous experimental manipulations, affect demand.

Related Resources
WORKING PAPER : Barriers to household Risk management
POLICY MEMO : Weather Indexed Insurance for Smallholder Farmers – A Survey of Evidence