Index Insurance for Developing Country Agriculture: A Reassessment

Michael Carter (), Alain de Janvry (), Elisabeth Sadoulet () and Alexandros Sarris ()
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Michael Carter: Department of Agricultural and Resource Economics, University of California, Davis, California 95616
Alexandros Sarris: Department of Economics, University of Athens, 10559 Athens, Greece

Annual Review of Resource Economics, 2017, vol. 9, issue 1, 421-438

Abstract: With uninsured risk representing a major hurdle to investment, productivity growth, and poverty reduction in developing country smallholder agriculture, index-based agricultural insurance has offered the promise of overcoming the hurdles of traditional indemnity-based insurance for this context. In spite of extensive experimentation, take-up has been disappointingly low without large and sustained subsidies. We show that existing constraints on take-up can partially be overcome using revised contract designs, advanced technology for better measurement, improved marketing, and better policy support. However, because index insurance is likely to remain expensive in that context, we suggest that improved index insurance be combined with stress tolerant seed varieties and new risk-oriented savings and credit products that build on the complementarities between what can be offered by index insurance and these other instruments to cope with shocks and manage risk.

Keywords: agricultural risk; rural financial markets; subsidies (search for similar items in EconPapers)
JEL-codes: G22 O12 O13 Q14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (63)

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