The dynamics of insurance demand under liquidity constraints and insurer default risk:
Low demand for micro-insurance has been a prominent problem in developing countries. We study the dynamics of insurance demand by risk-averse farmers who can borrow and lend subject to a credit constraint and who also perceive a risk of insurer default. Credit constraints and the possibility of insurer default both reduce the demand for insurance. We then propose an alternative insurance design that allows farmers to enter an insurance contract while delaying payment of the premium until the end of the insured period. We show how this alternative design can increase insurance take-up by relaxing the liquidity constraint and assuaging farmersâ€™ concerns about insurer default. We also investigate the effects of the associated problem of farmers reneging on their delayed premium payment if the insured event does not occur.
|Date of creation:||2012|
|Contact details of provider:|| Postal: 1201 Eye Street, NW, Washington, DC 20005-3915|
Web page: http://www.ifpri.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
- Abhijit V. Banerjee & Timothy Besley & Timothy W. Guinnane, 1994.
"Thy Neighbor's Keeper: The Design of a Credit Cooperative with Theory and a Test,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 109(2), pages 491-515.
- Guinnane, T. & Banerjee, A. & Besley, T., 1993. "Thy Neighbor's Keeper: the Design of a Credit Cooperative with Theory and a Test," Papers 705, Yale - Economic Growth Center.
- Xavier Giné & Robert Townsend & James Vickery, 2008. "Patterns of Rainfall Insurance Participation in Rural India," World Bank Economic Review, World Bank Group, vol. 22(3), pages 539-566, October.
- Xavier Giné & Robert M. Townsend & James Vickery, 2007. "Patterns of rainfall insurance participation in rural India," Staff Reports 302, Federal Reserve Bank of New York.
- Gine, Xavier & Townsend, Robert & Vickery, James, 2007. "Patternsof rainfall insurance participation in rural India," Policy Research Working Paper Series 4408, The World Bank.
- Helge Braun & Winfried Koeniger, 2007. "On the role of market insurance in a dynamic model," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 61-90, June.
- Helge Braun & Winfried Koeniger, 2007. "On the role of market insurance in a dynamic model," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 61-90, June.
When requesting a correction, please mention this item's handle: RePEc:fpr:ifprid:1174. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.