Resource information
Index insurance, such as weather
indexing, addresses other inherent problems in insurance by
using an indicator that is not affected by individual
behavior and may address monitoring costs and moral hazard.
A number of innovations using index insurance are being
tried currently in diverse settings ranging from India to
Mongolia to Malawi. Marketing costs may limit the provision
of such insurance to small farmers, but even in such cases
microfinance institutes may serve as market intermediaries.
Moreover, state and submational governments can use
insurance to achieve countercyclical funding programs. In
this vein, municipal governments in Mexico have used
insurance to finance disaster contingency while the World
Food Program has insured a portion of its emergency
assistance to Ethiopia. Humanitarian organizations and NGOs
may also seek insurance in this manner.
