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Price and Information Type in Life Microinsurance Demand: Experimental Evidence from Mexico

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Price and Information Type in Life Microinsurance Demand: Experimental Evidence from Mexico

 In this paper, Bauchet studies the impact of price and information type on the demand for life microinsurance among borrowers of a large microfinance institution in Mexico. Borrowers were randomly assigned to two of four treatments: (i) no longer receive a base amount of subsidized insurance coverage or keep the subsidy, and (ii) be informed with a message emphasizing the financial or emotional toll of a funeral on the surviving family. On average, eliminating the subsidy led to a decrease in insurance coverage, but the type of information did not impact coverage. The nature of the marketing message mattered when the subsidy was eliminated, however. Although all borrowers decreased their coverage as the subsidy was eliminated, younger borrowers presented with the emotional message were less likely to drop coverage than their counterparts presented with the financial message. The impact was reversed for middle-aged borrowers: the financial information led to a smaller drop in coverage than the emotional message following the elimination of the subsidy. The findings add to the literature on how information drives behavior in developing countries, and suggest that specific information provided at the time of choice was critical to help borrowers make a decision regarding a risk management strategy.

File Name: Bauchet_Job Market Paper_20 Dec 2012.pdf
File Type: application/pdf
Download: 470 times
Created Date: 12-20-2012

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