Weather Insurance Savings Accounts

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 expe...

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Main Authors:	Stein, Daniel, Tobacman, Jeremy
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	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
Online Access:	http://documents.worldbank.org/curated/en/2015/04/24324721/weather-insurance-savings-accounts http://hdl.handle.net/10986/21849

id	okr-10986-21849
recordtype	oai_dc
spelling	okr-10986-218492021-04-23T14:04:05Z Weather Insurance Savings Accounts Stein, Daniel Tobacman, Jeremy 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 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. 2015-05-04T19:00:33Z 2015-05-04T19:00:33Z 2015-04 Working Paper http://documents.worldbank.org/curated/en/2015/04/24324721/weather-insurance-savings-accounts http://hdl.handle.net/10986/21849 English en_US Policy Research Working Paper;No. 7235 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	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
spellingShingle	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 Stein, Daniel Tobacman, Jeremy Weather Insurance Savings Accounts
relation	Policy Research Working Paper;No. 7235
description	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.
format	Working Paper
author	Stein, Daniel Tobacman, Jeremy
author_facet	Stein, Daniel Tobacman, Jeremy
author_sort	Stein, Daniel
title	Weather Insurance Savings Accounts
title_short	Weather Insurance Savings Accounts
title_full	Weather Insurance Savings Accounts
title_fullStr	Weather Insurance Savings Accounts
title_full_unstemmed	Weather Insurance Savings Accounts
title_sort	weather insurance savings accounts
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/04/24324721/weather-insurance-savings-accounts http://hdl.handle.net/10986/21849
_version_	1764449429005271040

Weather Insurance Savings Accounts

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