A randomised evaluation of the effects of an agricultural insurance programme on rural households’ behaviour: evidence from China

The provision of weather insurance is a potential way of shielding farmers from weather related shocks and reducing poverty. However, the use of weather insurance is not widespread in many countries. In China, even with a government subsidy of 70 per cent, the take-up of weather insurance is quite low. 

This evaluation by Jing Cai, Alain de Janvry and Elisabeth Sadoulet looked at the impact of financial education, social learning and contract design on the take-up of a new weather insurance product in China. The study found that financial education about insurance increases take-up from 35 per cent to 50 per cent. There were large spillover effects of financial education: farmers who had more friends exposed to financial training performed significantly better on an insurance knowledge test. The study also found that offering a menu of insurance contracts rather than a single contract increased take-up dramatically.