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Can Parametric Microinsurance Improve the Financial Resilience of Low-Income Households in the United States?

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Listed:
  • Carolyn Kousky

    (University of Pennsylvania)

  • Helen Wiley

    (University of Pennsylvania)

  • Len Shabman

    (Resources for the Future)

Abstract

Natural disaster risk is escalating around the globe and in the United States. A large body of research has found that lower-income households disproportionally suffer from disasters and are less likely to recover. Poorer households often lack the financial resources for rebuilding, endangering other aspects of wellbeing. Parametric microinsurance has been used in many developing countries to improve the financial resilience of low-income households. This paper presents a review of the evidence for implementing parametric microinsurance in the U.S., with spillover lessons for other highly developed countries. We discuss the benefits and the challenges of microinsurance in a US context and explore 4 possible distribution models that could help overcome difficulties, with policies being provided: (1) by an aggregator, (2) through a mobile-based technology, (3) by linking to other products or retailers, or (4) through a public sector insurer.

Suggested Citation

  • Carolyn Kousky & Helen Wiley & Len Shabman, 2021. "Can Parametric Microinsurance Improve the Financial Resilience of Low-Income Households in the United States?," Economics of Disasters and Climate Change, Springer, vol. 5(3), pages 301-327, October.
    • Handle: RePEc:spr:ediscc:v:5:y:2021:i:3:d:10.1007_s41885-021-00088-1
    DOI: 10.1007/s41885-021-00088-1
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    1. Bingbin Wu & Linping Wang & Lin Yao, 2023. "A Mechanistic Study of the Impact of Digital Payments on Rural Household Development Resilience," Sustainability, MDPI, vol. 15(14), pages 1-20, July.
    2. Eberhard Feess & Cathrin Jordan & Ilan Noy, 2022. "Insurance for Catastrophes - Indemnity vs. Parametric Insurance with Imperfect Information," CESifo Working Paper Series 9631, CESifo.

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