How do small-holder farmers understand insurance, and how much do they want it? Evidence from Africa

Innovative micro-insurance schemes can be one tool to help African small-holder farmers cope with climate variability and change. A critical challenge for implementing such risk transfer programs, however, is helping participants understand how insurance operates, and there is evidence that farmers with a poor understanding of insurance are less likely to use it. One of the proposed tools to help farmers understand insurance is a simulation game, through which farmers can gain first-hand experience with a functioning insurance market. This paper reports on the results of experiments in Ethiopia and Malawi, investigating farmers’ understanding and the effectiveness of a role-playing game at improving that understanding. Our results suggest a generally poor understanding of basic insurance concepts, and are consistent with past results in suggesting that better understanding correlates with greater willingness to purchase it. Our results also suggest that role-playing games may be an important tool for improving understanding, but that they do not necessarily out-perform more conventional training practices.