The value of customized insurance for farmers in rural Bangladesh:
AbstractFarmers in rural Bangladesh face multiple sources of uninsured risk to agricultural production and household assets. In this paper, we present results from an experimental demand-elicitation exercise in rural Bangladesh to shed light on smallholder farmersâ€™ interest in formal insurance products. We propose a suite of insurance and savings products, and we randomly vary the price of one insurance option (area-yield insurance) and the presence of one of the savings options (group savings). Consistent with economic theory, farmers buy more of the insurance products that cover the risks they primarily face. However, because farmers are subject to a variety of risks, they do not focus on only one type of insurance; instead, they evenly split their endowment between life and disability insurance and agricultural insurance. Demand for area-yield insurance falls with price; we also observe important cross-price elasticities with other insurance products. The presence of group savings does not alter demand for insurance, though group savings is found to be a particularly popular risk management tool, especially when decisions are made in groups.
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Bibliographic InfoPaper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1202.
Date of creation: 2012
Date of revision:
Risk; Insurance; demand; Elasticity; Decision-making; rural areas;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-12-15 (Agricultural Economics)
- NEP-ALL-2012-12-15 (All new papers)
- NEP-IAS-2012-12-15 (Insurance Economics)
- NEP-MFD-2012-12-15 (Microfinance)
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