NDLI: The role of asymmetric information in multi-peril picture-based crop insurance: Field experiments in India

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The role of asymmetric information in multi-peril picture-based crop insurance: Field experiments in India

Content Provider	Consultative Group on International Agricultural Research (CGIAR)
Author	Ceballos, Francisco Kramer, Berber
Organization	IFPRI - Markets, Trade, and Institutions Division
Organization	IFPRI - Picture-Based Insurance
Spatial Coverage	India [IN]
Description	Smallholder farmers in developing countries generally lack access to affordable agricultural insurance, in part because of high loss verification costs and asymmetric information in indemnity insurance and basis risk in index-based insurance. Advances in remote sensing and other digital technologies can help overcome these challenges by allowing for low-cost, remote loss verification, and settling claims based on observed visible damage in a farmer’s fields. By effectively proxying for indemnity insurance, however, such a product may be subject to moral hazard and adverse selection. We test these hypotheses leveraging the rollout of picture-based crop insurance among smallholder farmers in northwestern India. We find no evidence of moral hazard or adverse selection, and that the use of technologies increases willingness to pay. We conclude that digital technologies are a valuable tool to provide low cost, sustainable crop insurance remotely, at lower levels of basis risk than index products.
Sponsorship	International Initiative for Impact Evaluation
Related Links	https://cgspace.cgiar.org/items/c137494d-0799-4bfa-a39a-27e62134ea55
File Format	PDF
DOI	10.2499/p15738coll2.134941
Language	English
Publisher	International Food Policy Research Institute
Publisher Place	Washington, DC
Access Restriction	Open
Subject Keyword	Policies, Institutions, and Markets Insurance Asymmetric Information Field Experimentation Technology Crops Farmers Agricultural Insurance Crop Insurance Smallholders Mobile Equipment Imagery Risk Adverse Selection
Content Type	Text
Resource Type	Article
Subject	Agronomy and Crop Science Food Science Plant Science

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