Subsidy Policies and Insurance Demand
Jing Cai, Alain de Janvry, Elisabeth Sadoulet
American Economic Review · 2020 · Volume 110 · Issue 8
Abstract
Using 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.
Keywords
Insurance, Insurance Companies, Actuarial Studies, Household Finance: Insurance, Household Finance: Financial Literacy, Climate, Natural Disasters and Their Management, Global Warming
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