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Insuring the Never before Insured: Explaining Index Insurance through Financial Education Games

Published by:
Document
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Publication date
30/10/2008
Number of Pages
8
Language:
English
Type of Publication:
Working Papers & Briefs
Focus Region:
Global
Focus Topic:
Climate / Weather / Environment
Type of Risk:
Natural disasters
Type of Risk Managment Option:
Risk transfer
Commodity:
Other
Author
Michael R. Carter, Christopher B. Barrett, Stephen Boucher, Sommarat Chantarat, Francisco Galarza, John McPeak, Andrew Mude, Carolina Trivelli
Organization
BASIS, University of Wisconsin-Madison

The costs of uninsured risks for low-wealth agricultural and pastoral households are well documented. Risk makes people poor when it leads them to shy away from higher-return but riskier activities. Yet, insurance is most notable for its absence in low-income rural areas. While there are many reasons why insurance contracts are not offered in these areas, the innovation of a new generation of financial technologies built around the concept of parametric or index insurance raises the prospect that insurance instruments could be made to sustainably work in low-income environments.