NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Disaster Experience and Knowledge Affect Insurance Take-up Decisions?

Jing Cai, Changcheng Song

NBER Working Paper No. 22403
Issued in July 2016
NBER Program(s):Development Economics

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.

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Document Object Identifier (DOI): 10.3386/w22403

Published: Jing Cai & Changcheng Song, 2016. "Do disaster experience and knowledge affect insurance take-up decisions?," Journal of Development Economics, .

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