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Contract Design and Insurance Demand

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  • Jing Cai

Abstract

We introduce experimental variation in the insurance contracts offered to rice farmers in China to study how contract design affects insurance takeup. We compare a single-contract offering with menus that include multiple contracts differing in premiums and payouts. Expanding the contract menu substantially increases take-up, primarily through higher adoption of the basic, lowest-cost contract. Additional experimental variation in relative prices and information provision shows that these effects are driven by context effects arising from relative price comparisons within the menu, rather than information inference. The findings highlight contract menu design as an effective supply-side tool for expanding insurance coverage.

Suggested Citation

  • Jing Cai, 2026. "Contract Design and Insurance Demand," NBER Working Papers 34797, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34797
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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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