From index to indemnity insurance using digital technology: Demand for picture-based crop insurance

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dc.creatorCeballos, Francisco
dc.creatorKramer, Berber
dc.date2019-12-16
dc.date2024-06-21T09:10:48Z
dc.date2024-06-21T09:10:48Z
dc.date.accessioned2026-06-27T15:34:26Z
dc.descriptionProduction risk is pervasive in agriculture, yet smallholder farmers lack access to quality insurance. This is due to asymmetric information in markets for indemnity insurance, and high basis risk, limited trust, and poor understanding of index-based insurance. Digital technologies can help overcome these challenges by improving crop monitoring and yield prediction, allowing insurers to provide products that move towards indemnity insurance. Although this can potentially improve demand, it also comes at the risk of introducing adverse selection. We analyze this trade-off by eliciting willingness to pay for both index-based insurance and picture-based insurance (PBI) for visible crop damage through incentivized auctions with smallholder farmers in northwestern India. Participants reveal a higher willingness to pay for PBI than for index-based coverage. Although at commercial rates, demand remains low for either product, PBI improves demand at the subsidized premium levels maintained by India’s national insurance scheme. Moreover, we find no evidence of adverse selection. We conclude that digital technologies can facilitate a shift from index-based insurance to indemnity insurance. By reducing basis risk and strengthening trust and understanding, this can improve demand for crop insurance.
dc.formatapplication/pdf
dc.identifierhttps://hdl.handle.net/10568/147049
dc.identifier.urihttp://hdl.handle.net/123456789/108238
dc.languageen
dc.publisherInternational Food Policy Research Institute
dc.relationhttps://doi.org/10.22004/ag.econ.275926
dc.relationhttps://doi.org/10.1016/j.agrformet.2018.11.002
dc.relationhttps://doi.org/10.1016/j.deveng.2019.100042
dc.relationhttps://hdl.handle.net/10568/148110
dc.relationhttps://hdl.handle.net/10568/148111
dc.relationhttps://doi.org/10.23846/TW13FE11
dc.relationhttps://doi.org/10.2499/p15738coll2.134239
dc.relationhttps://doi.org/10.2499/p15738coll2.134941
dc.rightsOpen Access
dc.sourceCeballos, Francisco; and Kramer, Berber. 2019. From index to indemnity insurance using digital technology: Demand for picture-based crop insurance. IFPRI Discussion Paper 1890. Washington, DC: International Food Policy Research Institute (IFPRI). https://hdl.handle.net/10568/147049
dc.subjectinsurance
dc.subjectinnovation
dc.subjectwillingness to pay
dc.subjecttechnology
dc.subjectlosses
dc.subjectcrop insurance
dc.subjectassessment
dc.subjectmobile equipment
dc.subjectrisk
dc.subjectselection criteria
dc.subjectphotography
dc.subjectdigital technology
dc.titleFrom index to indemnity insurance using digital technology: Demand for picture-based crop insurance
dc.typeWorking Paper

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Instituto Internacional de Investigación sobre Políticas Alimentarias (IFPRI)