Microinsurance: A Case Study of the Indian Rainfall Index Insurance Market
World Bank - Development Economics Research Group and Bureau for Research and Economic Analysis of Development (BREAD)
Federal Reserve Banks - Federal Reserve Bank of New York
Robert M. Townsend
Massachusetts Institute of Technology (MIT)
James I. Vickery
Federal Reserve Bank of New York
October 1, 2010
World Bank Policy Research Working Paper No. 5459
Rainfall index insurance provides a payout based on measured local rainfall during key phases of the agricultural season, and in principle can help rural households diversify a key source of idiosyncratic risk. This paper describes basicfeatures of rainfall insurance contracts offered in India since 2003, and documents stylized facts about market demand and the distribution of payouts. The authors summarize the results of previous research on this market, which provides evidence that price, liquidity constraints, and trust all present significant barriers to increased take-up. They also discuss potential future prospects for rainfall insurance and other index insurance products.
Number of Pages in PDF File: 49
Keywords: Climate Change Economics, Insurance Law, Debt Markets, Financial Literacy, Insurance & Risk Mitigationworking papers series
Date posted: October 26, 2010
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