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

Recent financial liberalization in emerging economies has led to the rapid introduction of new financial products. Lack of experience with financial products, low levels of education, and low financial literacy may slow adoption of these products. This article reports on a field experiment that offered an innovative new financial product, rainfall insurance, to 600 small-scale farmers in India. A customized financial literacy and insurance education module communicating the need for personal financial management and the usefulness of formal hedging of agricultural production risks was offered to randomly selected farmers in Gujarat, India. The authors evaluate the effect of the financial literacy training and three marketing treatments using a randomized controlled trial. Financial education has a positive and significant effect on rainfall insurance adoption, increasing take-up from 8% to 16%. Only one marketing intervention, the money-back guarantee, has a consistent and large effect on farmers' purchase decisions. This guarantee, comparable to a price reduction of approximately 40%, increases demand by seven percentage points.

Gaurav, Cole and Tobacman (2011)



Rural: Gujarat.RCT.Farmers offered rainfall insurance, with some offered a money-back guarantee (equivalent to a 60% price discount). Half of the treatment group was also given financial literacy training in two three-hour sessions.The training increased the take up by 8.1% (compared to a base take-up rate of 8%). The 60% price discount increases the base take-up rate by 6.9 percentage points. land-owning farmers from rainfed villages in coastal districts; 2/3 of sample own less than 4 hectares of land. Gender included in model but gender-specific effects not reported.