Protecting farmers from weather-based risk

Abstract

Weather index insurance protects farmers against losses due to extreme weather and facilitates investments in their farms, but low demand for these products at market prices suggests the need for alternative approaches to protecting farmers from weather-based risk in developing countries.Farmers at work, Manavannur village, Tamil Nadu. Photo: Putul Gupta | J-PAL Summary:Floods, droughts, heat waves, cold spells, and other natural disasters are large sources of risk for farmers. A drought, heat wave, or other disaster can lead to a poor harvest, leaving uninsured farming households with little income for the season. In order to cope with unpredictable weather, farmers often plant low-risk, low-return crops instead of investing in more profitable crops that are more sensitive to weather.