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Microinsurance: A Case Study of the Indian Rainfall Index Insurance Market

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Publication date
27/07/2011
Number of Pages
38
Language:
English
Type of Publication:
Studies
Focus Region:
Asia and the Pacific
Focus Topic:
Climate / Weather / Environment
Type of Risk:
Weather & Climate related
Type of Risk Managment Option:
Risk transfer
Commodity:
Crops
Author
Xavier Giné, Lev Menand, Robert Townsend, and James Vickery
Organization
The World Bank

Rainfall index insurance provides a payout based on measured local rainfall during key phases of the agricultural season, and in principle can help rural households diversify a key source of idiosyncratic risk. We describe basic features of rainfall insurance contracts offered in India since 2003, and document stylized facts about market demand and the distribution of payouts. We summarize results of our previous research on this market, which provides evidence that price, liquidity constraints and trust all present significant barriers to increased take-up. We also discuss potential future prospects for rainfall insurance and other index insurance products.