Coping with Shocks: Impact of Insurance Payouts on Small-Scale Farmers
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Weather insurance is regarded as a powerful tool to protect small-scale farmers from the economic impacts of natural disasters. In cases in which insured farmers suffer a loss, insurance payouts mitigate the financial consequences that otherwise could have forced them to apply disruptive coping strategies. This paper analyses the effects of payouts of yield insurance in Colombia on small-scale tobacco farmers. Two questions are raised: were the payouts made consistently after shocks and how did the payouts affect the ex post coping strategies of the beneficiaries? The data indicate a significant overlap in household losses between insured farmers who did and those who did not receive payouts, even though the insurance indemnified the main risks of the main income sources. Exploring the overlap to match the farmers of the two groups, it is suggested that the beneficiaries were better equipped to protect their resources, including assets and savings, after shocks.
Keywordscoping strategies insurance natural disasters risk management Colombia
This article benefited greatly from suggestions by Marcela Ibanez and Stephan Klasen and comments received at the brown bag seminar of the chair for Social Policy and Education of the University of Stellenbosch, the Development Economics seminar of the University of Göttingen, the AEL conference in Munich (2013), and the 2nd International Microinsurance Workshop in Munich (2014).
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