Insurable Interest Regulatory Exclusion

In Simple Words

Think of a rule that says only factory owners can buy disaster insurance, while the workers who lose their jobs when the factory shuts down are banned from buying protection. When the government lets farm owners buy weather protection, the farmers take bigger production risks that make worker wages swing wildly across weather states. Banning workers from buying protection leaves the poorest segment of society worse off than if no insurance market existed at all.

Research question

Insurance regulatory frameworks mandate that microinsurance products require proof of land ownership (insurable interest), restricting sales exclusively to landowning farmers. This regulatory restriction prevents landless wage laborers from purchasing index insurance to hedge against weather-induced local wage collapses.

Participants

N = 4,706 landless agricultural wage workers aged 20+ across 42 rural Indian villages.

Study Design

Policy counterfactual simulations using structural general-equilibrium wage parameters estimated from a two-stage clustered RCT.

Results

Restricting rainfall index insurance to 25.6% of landowning cultivators while excluding landless laborers reduces landless daily wages by 0.63 log points at the 30th percentile of rainfall and by 0.23 log points at median rainfall relative to a no-insurance baseline.

Takeaway

Amend microinsurance regulations to abolish the land-ownership insurable interest requirement, allowing wage laborers to purchase weather index contracts.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Median

The middle number after arranging the values from smallest to largest. If there are two middle numbers, use their average.

ExampleFor the values 2, 4 and 12, the middle value is 4. The median is 4.

NIST · Measures of location ↗Read more about median →

Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →

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