Marketing Complex Financial Products in Emerging Markets: Evidence From Rainfall Insurance in India

This paper reports on a series of marketing experiments conducted in three districts of Gujarat, India, designed to test behavioral constraints to the purchase of rainfall insurance. A nonprofit organization, the Development Support Center, introduced rainfall insurance to 600 study households. Half of the sample was offered a financial literacy training program. Randomly selected farmers also received one or more of six cross cutting marketing treatments. The study finds that training has a positive and significant effect on rainfall insurance adoption, but only one of the six marketing treatments has a statistically significant effect. Conclusions include:

• Individuals educated in financial literacy and insurance are significantly more likely to purchase rainfall insurance;
• Low financial awareness of farmers is a formidable barrier to adoption of complex financial products like rainfall insurance;
• Most farmers find it difficult to understand fundamental insurance concepts necessary to make an informed and educated choice;
• It is possible to influence adoption behavior through information campaigns;
• Substantial increases in the efficiency of delivery are necessary before rainfall insurance becomes a financially sustainable product.