The researchers made a very simple change to the insurance policy: they shifted the payment date for the insurance to harvest time. 

In case of a good harvest, the farmer received the price for his harvest from which the insurance premium was deducted. In case of a bad harvest, the farmer received a price for his harvest and an insurance payout. The researchers tested this innovation though a randomised controlled trial. “By simply moving the payment date to harvest time, we increased the pick-up rate for the insurance from five to 72 per cent,” says Lorenzo Casaburi, and adds: “What’s more, it was the poorest farmers that increased their demand the most.”

Cash constraints and present bias

To explain the results the authors compared pick-up rates in other payment schemes. For example, they offered another group a discount of 30 per cent, with a payment at the beginning of the season.