UMD-Led Study Examines How Subsidies, Extreme Weather Events, and Financial Education Can All Work Together to Promote Long-Term Agricultural Insurance Adoption

Researchers find that it is the combination of financial literacy and needing to actually use your policy that leads to understanding the value of insurance products

Image Credit: Rajesh Ram

July 31, 2020 Samantha Watters

A new University of Maryland-led study shows that subsidies can help people continually purchase insurance products, but only if they have the financial literacy to understand the benefits of the policy and have the experience of seeing the benefits in action. In a new paper published in American Economic Review, researchers conducted the first ever experimental study to look at the impact of subsidy policies on insurance policy adoption. In the US, most insurance products are highly subsidized by the government, but recent studies on health insurance show that people seem to put very low value on health and agricultural insurance products alike, leading to low adoption. This paper provides insight into this dilemma known as the “insurance puzzle”, with implications for insurance subsidy policies and educational programs.
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