Weather Insurance Savings Accounts
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World Bank, Washington, DC
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Better insurance against rainfall risk
could improve the security of hundreds of millions of
agricultural households around the world. However, customers
have shown little demand for stand-alone insurance products.
This paper theoretically and experimentally analyzes an
innovative financial product called a Weather Insurance
Savings Account (WISA), which combines savings and rainfall
insurance. The paper uses a standard model of intertemporal
insurance demand to study how customers demand for a WISA
varies with the amount of insurance offered. A laboratory
experiment is then used to elicit participants valuations of
pure insurance, pure savings, and intermediate WISA types.
Contrary to the standard model, within-subjects comparisons
show that many participants prefer both pure insurance and
pure savings to any interior mixture of the two, suggesting
that market demand for a WISA is likely to be low.
Additional experimental and observational evidence
distinguishes between several alternative explanations. One
possibility that survives the additional tests is
diminishing sensitivity to losses, as in prospect theory.
Palabras clave
CATASTROPHIC EVENTS, RISKS, FINANCIAL SERVICES, DEPOSIT, HOLDING, DURABLE GOODS, CUSTOMER, GOVERNMENT CROP INSURANCE, RISK REDUCTION, VALUATION, FARMER, INCOME, INTEREST, LIFE INSURANCE, GUARANTEES, SAVINGS INSTRUMENT, MARGINAL COST, SAVINGS ACCOUNTS, INTEREST RATE, OPTION, EXCHANGE, DISCOUNT RATE, INSURER, INFORMATION, DEVELOPING COUNTRIES, DEVELOPING ECONOMIES, INSURANCE POLICIES, LOAN, DISCOUNT, ASYMMETRIC INFORMATION, DISASTER, PRIVATE INSURANCE, PRICE, SAVING, INTERNATIONAL BANK, INSURANCE MARKET, INSURANCE COMPANY, POLICYHOLDERS, OFFER PRICE, CROP INSURANCE, PUBLIC POLICY, SAVINGS, FINANCIAL PRODUCT, CREDIT UNIONS, INSURANCE MARKETS, INSURANCE PRODUCT, LOW-INCOME COUNTRIES, NASCENT MARKET, INCOME SHOCK, NEW PRODUCT, DEPOSIT ACCOUNTS, MARKETS, RETURN, RATES, LOANS, FARMERS, CONSUMER DEMAND, INSURANCE COVERAGE, INSURANCE POLICY, NEGATIVE SHOCK, BANK POLICY, MARKET PRICE, SAVINGS ACCOUNT, BANKS, TECHNOLOGY, DROUGHTS, EMERGENCY, VALUATIONS, CREDIT CONSTRAINTS, GOOD, WAGES, AGRICULTURAL LOANS, GENERAL INSURANCE, DROUGHT, BARRIERS, COUPONS, DERIVATIVE, INSURANCE PRODUCTS, ANNUITIES, FUTURE, CROP INSURANCE SCHEME, LOSSES, BANK, RETURNS, CREDIT, MICROINSURANCE, CLAIMS, COINSURANCE, RISK EXPOSURE, CONSUMERS, BIDS, PROPERTIES, SHARES, MICRO-INSURANCE, FACE VALUE, MARKET, FACTORS, ECONOMICS, EXPOSURE, INSURANCE, MICROFINANCE, LOSS, AGENTS, RENTERS INSURANCE, GOODS, SECURITY, DURABLE, INVESTMENT, RISK, COMMISSIONS, SHARE, VALUATION TECHNIQUES, POVERTY, BANKING, MARKET DEMAND, BID, INVESTMENTS, RISK MANAGEMENT, LENDING, NOMINAL INTEREST RATE, INSURANCE COMPANIES, UNDERINSURED, EXCHANGE RATE, INSTRUMENT, CUSTOMERS, RISK AVERSION, COVERAGE, PARTIAL RISK, GUARANTEE, PREMIUMS