From index to indemnity insurance using digital technology: Demand for picture-based crop insurance
Production 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...
| Autores principales: | , |
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| Formato: | Artículo preliminar |
| Lenguaje: | Inglés |
| Publicado: |
International Food Policy Research Institute
2019
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| Materias: | |
| Acceso en línea: | https://hdl.handle.net/10568/147049 |
| _version_ | 1855535942984531968 |
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| author | Ceballos, Francisco Kramer, Berber |
| author_browse | Ceballos, Francisco Kramer, Berber |
| author_facet | Ceballos, Francisco Kramer, Berber |
| author_sort | Ceballos, Francisco |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Production 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. |
| format | Artículo preliminar |
| id | CGSpace147049 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2019 |
| publishDateRange | 2019 |
| publishDateSort | 2019 |
| publisher | International Food Policy Research Institute |
| publisherStr | International Food Policy Research Institute |
| record_format | dspace |
| spelling | CGSpace1470492025-11-06T07:18:06Z From index to indemnity insurance using digital technology: Demand for picture-based crop insurance Ceballos, Francisco Kramer, Berber insurance innovation willingness to pay technology losses crop insurance assessment mobile equipment risk selection criteria photography digital technology Production 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. 2019-12-16 2024-06-21T09:10:48Z 2024-06-21T09:10:48Z Working Paper https://hdl.handle.net/10568/147049 en https://doi.org/10.22004/ag.econ.275926 https://doi.org/10.1016/j.agrformet.2018.11.002 https://doi.org/10.1016/j.deveng.2019.100042 https://hdl.handle.net/10568/148110 https://hdl.handle.net/10568/148111 https://doi.org/10.23846/TW13FE11 https://doi.org/10.2499/p15738coll2.134239 https://doi.org/10.2499/p15738coll2.134941 Open Access application/pdf International Food Policy Research Institute Ceballos, 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 |
| spellingShingle | insurance innovation willingness to pay technology losses crop insurance assessment mobile equipment risk selection criteria photography digital technology Ceballos, Francisco Kramer, Berber From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title | From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title_full | From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title_fullStr | From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title_full_unstemmed | From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title_short | From index to indemnity insurance using digital technology: Demand for picture-based crop insurance |
| title_sort | from index to indemnity insurance using digital technology demand for picture based crop insurance |
| topic | insurance innovation willingness to pay technology losses crop insurance assessment mobile equipment risk selection criteria photography digital technology |
| url | https://hdl.handle.net/10568/147049 |
| work_keys_str_mv | AT ceballosfrancisco fromindextoindemnityinsuranceusingdigitaltechnologydemandforpicturebasedcropinsurance AT kramerberber fromindextoindemnityinsuranceusingdigitaltechnologydemandforpicturebasedcropinsurance |