Do disaster experience and knowledge affect insurance take-up decisions?”

• Main Authors: CAI, Jing, SONG, Changcheng
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Insurance; Take-up; Game; Experience; Knowledge; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6506; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7505/viewcontent/do_distaster___PV.pdf
• Institution: Singapore Management University

This study examines the effect of experience and knowledge on weather insurance adoption. First, we conduct insurance games with farmers, and find that the treatment improves real insurance take-up by 46%. The effect is not driven by changes in risk attitudes and perceived probability of disasters, or by learning of insurance benefits, but is driven by the experience acquired in the game. Second, we find that providing information about the payout probability has a strong positive effect on insurance take-up. Finally, when subjects receive both treatments, the probability information has a greater impact on take-up than does the disaster experience.