Can insurance get by with a little help from friends?
Social networks increased uptake of insurance in a trial indicating potential to improve sales and insurance education.
Researchers estimated the role of information and social networks on the take-up of rice insurance using data from a randomized experiment where information was either provided directly through village meetings or indirectly through social networks.
Researchers first randomly divided villages into two groups. In treatment villages, they organized a village meeting to introduce the rice insurance program and explain the product, and invited a random sub-set of households to attend the meetings. Households were asked to enroll at the end of the meeting. The uninvited households were asked to enroll during door-to-door visits that occurred several days after the village meetings. In control villages, no village meetings were offered, and all households were asked to enroll during door-to-door visits. Researchers expected that households who attended village meetings were exposed to more information and could better understand the program and product, and thus were more likely to purchase the product relative to households who were visited door-to-door.
Researchers found that households attending village meetings enrolled 12 per cent more than the households in the control villages. Perhaps more importantly, the enrollment rate for the uninvited households in the treatment villages was also 7.7 per cent higher than households in the control villages, indicating a positive spillover effect of information flowing from households that attended the meetings to the uninvited households. Researchers also estimated for uninvited households in the treatment villages having one friend attend a meeting increased enrollment by around 4 per cent.
Given resource constraints associated with delivering insurance education, the study has policy implications on how to deliver education, specifically who it should be delivered to. Offering insurance education to specific households in a village selected for strong friendship links with others and their leadership roles, and relying on social networks to extend the effect of education on more farmers, can be a cost- effective way of improving enrollment.
For more on the research design and results, see Research Paper No. 8.