Insuring farmers against weather shocks: evidence from India

Abstract

The International Initiative for Impact Evaluation (3ie) is an international grant-making NGO promoting evidence-informed development policies and programmes. We are the global leader in funding, producing and synthesising high-quality evidence of what works, for whom, how, why and at what cost. We believe that better and policy-relevant evidence will help make development more effective and improve people's lives. 3ie impact evaluations3ie-supported impact evaluations assess the difference a development intervention has made to social and economic outcomes. 3ie is committed to funding rigorous evaluations that include a theory-based design, use the most appropriate mix of methods to capture outcomes and are useful in complex development contexts. About this report3ie accepted the final version of this report, Insuring farmers against weather shocks: evidence from India, as partial fulfilment of the requirements of grant OW3.1171 awarded under Open Window 3. The report has been formatted to 3ie standards. However, despite best efforts in working with the authors, some references are still missing and figures and tables could not be improved. We have copy-edited the content to the extent possible. These efforts caused a delay in publishing this report, which is why the series number and date are out of sequence.All of the content is the sole responsibility of the authors and does not represent the opinions of 3ie, its donors or its board of commissioners. Any errors and omissions are the sole responsibility of the authors. Please direct any comments or queries to the corresponding author, Jeremy Tobacman, at tobacman@wharton.upenn.edu Funding for this impact evaluation was provided by 3ie's donors, which include UK Aid, the Bill & Melinda Gates Foundation and the Hewlett Foundation. A complete listing of all of 3ie's donors is available on the 3ie website. SummaryWith weather risk a key source of income vulnerability for many of the 2.5 billion people around the world who derive their income from smallholder agriculture, rainfall insurance represents a potentially important product innovation.This study performs a rigorous evaluation of the long-term impacts of rainfall insurance access and coverage on agricultural investment and outcomes, consumption and wellbeing proxies using a randomised controlled trial design. Main findingsWe find no systematic, long-term effect of insurance access or adoption on agricultural investment decisions. There is also little to no statistical difference in reported agricultural revenues and profits. This is true even though (randomly assigned) subsidies caused households that purchased insurance policies to experience greater financial income from insurance payouts than financial costs from insurance premiums. These findings suggest that the insurance products studied were not sufficient to induce farmers to adopt theoretically promising alternative investments, such as high-yielding variety crops.Demand for rainfall insurance among study households was moderate. Depending on the...

Effects of input vouchers and rainfall insurance on agricultural production and household welfare: Experimental evidence from northern Ethiopia

“…The results on the insurance-voucher bundle in the first year, as well as the cumulative effect estimates over the two years, were all statistically insignificant. Nevertheless, our results are in line with related studies, such as Karlan et al (2014), Ahmed et al (2017), andTobacman et al (2017), all of which report no consistent and statistically significant effects on output values or profits.…”

“…However, Giné and Yang (2009) show that making loans to Malawian farmers conditional on insurance adoption reduces the loaned amounts and the purchase of improved seeds. Ahmed et al (2017) find that insurance participation does not increase inputs or farm output in Ethiopia, and Tobacman et al (2017) report similar results for Indian farmers.…”

Gender-inclusive, -responsive, and -transformative agricultural insurance: A literature review

“…A few studies however indicate that the long-term effects of insurance on household well-being are rather weak (Tobacman et al 2017) and insurance benefits are skewed to wealthier farmers-who are more likely to be men (Glauber 2012). Failing to acknowledge gender inequities in the distribution of insurance outcomes can limit the longterm effectiveness of insurance as a risk-coping strategy.…”