Subsidy Policies and Insurance Demand
- (pp. 2422-53)
AbstractUsing data from a two-year pricing experiment, we study the impact of subsidy policies on weather insurance take-up. Results show that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the payout effect, we find that for households that randomly benefited from financial education, receiving a payout provides a one-time learning experience that improves take-up permanently. In contrast, households with poor insurance knowledge continuously update take-up decisions based on recent experiences with disasters and payouts. Combining subsidy policies with financial education can thus be effective in promoting long-run insurance adoption.
CitationCai, Jing, Alain de Janvry, and Elisabeth Sadoulet. 2020. "Subsidy Policies and Insurance Demand." American Economic Review, 110 (8): 2422-53. DOI: 10.1257/aer.20190661
- G22 Insurance; Insurance Companies; Actuarial Studies
- G52 Household Finance: Insurance
- G53 Household Finance: Financial Literacy
- Q54 Climate; Natural Disasters and Their Management; Global Warming