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  • Journal of Risk and Insurance

Targeting Weather Insurance Markets

By: Anita Mukherjee, Shawn Cole and Jeremy Tobacman
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Abstract

The suitability of insurance products often depends greatly on individual circumstances. This paper examines the challenges of heterogeneity in a relatively new product, weather‐indexed insurance. This index insurance product has been launched in over a dozen countries, with the goal of enabling households engaged in agricultural activity a means to manage risk. Using data from a large‐scale field experiment, we build and calibrate a model which accounts for household investment decisions, including the scope for self‐insurance via labor markets to (risky) wage work. Our results show that insurance is most valuable to households with reduced access to wage labor, or to those who face wages that are sensitive to rainfall risk. These findings have important implications for areas where index insurance is most effective.

Keywords

Index Insurance; Labor Markets; Self-insurance; Self-protection; Weather; Insurance; Markets; Household; Risk Management

Citation

Mukherjee, Anita, Shawn Cole, and Jeremy Tobacman. "Targeting Weather Insurance Markets." Journal of Risk and Insurance 88, no. 3 (September 2021): 757–784.
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About The Author

Shawn A. Cole

Finance
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More from the Authors
  • Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts By: Shawn A. Cole, Benjamin Iverson and P. Tufano
  • Engine No.1: An Impact Investing Firm Engages with ExxonMobil By: Mark Kramer, Shawn Cole, Vikram S. Gandhi and T. Robert Zochowski
  • Changing Gambling Behavior through Experiential Learning By: Shawn A. Cole, Martin Abel and Bilal Zia
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