Contract Design and Insurance Demand

Jing Cai

doi:10.3386/w34797

Contract Design and Insurance Demand

Jing Cai

Working Paper 34797

DOI 10.3386/w34797

Issue Date February 2026

We introduce experimental variation in the insurance contracts offered to rice farmers in China to study how contract design affects insurance takeup. We compare a single-contract offering with menus that include multiple contracts differing in premiums and payouts. Expanding the contract menu substantially increases take-up, primarily through higher adoption of the basic, lowest-cost contract. Additional experimental variation in relative prices and information provision shows that these effects are driven by context effects arising from relative price comparisons within the menu, rather than information inference. The findings highlight contract menu design as an effective supply-side tool for expanding insurance coverage.

We thank Stefano DellaVigna, Shachar Kariv, Botond Koszegi, David Levine, Edward Miguel, Matthew Rabin, Adam Szeidl, and seminar participants for helpful comments. We are grateful to the officials of the People’s Insurance Company of China for their close collaboration at all stages of the project. Financial support from the International Initiative for Impact Evaluation (3ie) and the ILO’s Microinsurance Innovation Facility is greatly appreciated. The project received IRB approval from UC Berkeley (2010-02-772). The experiment was registered in the AEA RCT Registry (AEARCTR-0004641, Cai (2019)). The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
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Jing Cai, "Contract Design and Insurance Demand," NBER Working Paper 34797 (2026), https://doi.org/10.3386/w34797.

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Contract Design and Insurance Demand

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