Dan Osgood, Nicole Peterson
The major elements and goals of the project are:
- To introduce loan and index insurance programs in agricultural communities to cope with climate and other environmental uncertainties
- To develop participatory processes
- Capacity building and research
- Developing tools for project implementation
- Exploration of temporal horizons, including economic experimental games in Ethiopia
- Hurricane index insurance is also being considered in the Caribbean
To achieve these goals, the research team developed materials for multi-day workshops and participatory insurance design processes, tested technologies and participatory processes for farmer-driven satellite-based index insurance, developed index insurance educational games based on the experimental economics experience, and prepared hurricane preparedness educational materials and exercises for the Red Cross.
- The economic games suggest that participants are interested in buying insurance, even when other options (e.g. keeping the money or investing it elsewhere) were available.
- There was a strong preference for more frequent, smaller insurance payments over larger, less frequent payouts. Contributions to the community savings fund were higher in communities with experience with similar funds (particularly those with larger Muslim populations, which avoid interest). Additional results are forthcoming.
- This project has the potential to contribute to a growing literature on participatory processes in economic development, and to the literature on group decision-making, particularly in microfinance programs. It also can potentially contribute to a growing literature on microfinance institutions in economic development, assessment of farmer risk preferences and attitudes, trade-offs in decision-making, the role of trust and organizational links in development projects, and climate forecast use in climate adaptation programs. The project shows value for both anthropological studies of development and climate adaptation, and decision-science studies of preference construction and risk management strategy trade-offs. Enhanced techniques include experimental games and development of tools to assess risk preferences of farmers, given that existing measures focus on gambling and economic investments, both of which are irrelevant to the field situation in Ethiopia.
- Worksheets, educational and capacity building materials have been developed for this project and have been widely used. Our involvement in the R4 project in Africa has deepened our relationship with insurance intermediaries, such as PlanetGuarantee, which has already adapted our farmer discussion materials for some of its projects in Africa.
- We developed a document, titled Index Insurance in Adaptation: Frequently Asked Questions, in order to inform the NGO and development community about the role of index insurance as a tool for adaptation to climate risk. This document will help improve the knowledge of the community regarding index insurance and climate risk opportunities. It will hopefully improve index insurance practices by helping ensure that decision makers are well informed of the limitations and advantages of index insurance in development.
- We work directly with multiple stakeholders at our field sites (water managers, farming communities, insurance companies, communities near retreating glaciers, etc.) and ask research questions whose answers have practical implications for these environmental decision makers.
- Dissemination of our research results will suggest improved participatory modes for development and presentation of scientific information more generally.
- We offer a model of close collaboration and integration for social and natural science research. Both types of researchers will better understand the limits and possibilities of the other’s disciplines, leading to better and more applicable interdisciplinary research.
- For general education in science, it is our experience that blending of social and natural science enriches and motivates students of all ages and the general public as well.
This portion of the project funded by CRED2 Award (2010-2015): Funding was provided under the cooperative agreement NSF SES-0951516 awarded to the Center for Research on Environmental Decisions.
For information about the full Index Insurance project, please visit the page for The Financial Instruments Sector Team.