1. Marketing Complex Financial Products in Emerging Markets: Evidence from Rainfall Insurance in India
Sarthak Gaurav, Shawn Cole, and Jeremy Tobacman
Copyright © President & Fellows of Harvard College.

2. Motivation
Financial liberalization has led to the rapid introduction of financial products around the world
Many products have tremendous potential to increase consumer welfare
Many products have tremendous potential to decrease consumer welfare
Many financial products are complex
State-contingent, must understand probabilities
Evaluating requires understanding time value of money
Many are not ‘experiential,’ only learn about value when it’s too late
Host of other complications: counter-party risk, etc.
Consumers with low levels of education and financial literacy may have difficulty making decisions
Rational decision may be to ‘opt out’ of unknown product

3. Today’s Paper Field experiment of financial literacy education “plus”
Small-scale farmers in three districts in rural Gujarat
Partner: Development Support Center
Main Hypothesis: Informational frictions suppress demand

4. Literature
Very large literature correlating financial literacy with outcomes
Lusardi et al.
Tremendous policy attention to financial literacy education
Very slim evidence financial education is effective
Cole and Shastri (2010) – No effect on US high school students
Cole, Sampson, and Zia (2011)—No effect

5. Sample selection
DSC identified three talukas, one each in Amreli, Bharuch, and Bhavnagar districts
Five villages within each taluka
Sampling frame of all landholding farmers who grow cotton or groundnut
Sample is 40 villages from each of these 15 villages

6. Summary Statistics

7. Treatments Financial Literacy Education
Two-day long “Training of the trainers”
Subjects invited to training, two three-hour sessions
(1) General lesson on financial management, including insurance
(2) Two interactive simulation games to learn how insurance works
Individual level randomization
300 from sample of 600 invited
Near-perfect compliance (297 of 300 attend)
Focus on ITT estimates
Orthogonal Marketing Manipulations
Money back offer
Weather Forecasts
MM demonstration
Money back offer Weather Forecasts MM demonstration
Money back offer, Weather Forecasts MM demonstration
Control Group

9. Financial Literacy Intervention

10. Summary
Financial education nearly doubles demand, increasing take-up from 6.4 percentage points in control group to 11.4% in the treatment group
Statistically significant
Possibly cost-effective
Point estimates on marketing treatments generally positive, but statistically insignificant individually
Joint, most intensive treatment increases demand by 10.7 percentage points
Suggests financial literacy important barrier
Money-back guarantee may be useful way to spur initial sales, obviously not financially viable in long term
But perhaps a “whole” rainfall insurance product would be attractive