The Power of Framing - A Randomized Control Trial on Microinsurance Take-up Rates in Paraguay

Abstract: Building on the economic literature on behavioral biases in individual decision-making, this study investigates whether framing influence the perceived value of microinsurance and, in turn, take-up rates. To derive the effects of framing on microinsurance take-up rates, a randomized control trial was conducted in Paraguay in cooperation with N.B Paraguay, a local microinsurance provider, in which 21,496 potential customers were contacted with a sales offer to sign up for LIFE, a life microinsurance product. The potential customers were randomly divided into three experimental groups and consequently exposed to either a no framed message (control group), positive framed message (positive treatment), or negative framed message (negative treatment). This study finds robust evidence that framing had a significantly positive effect on LIFE take- up rates and the negative framing increased take-up rates significantly more than the positive framing. The implications of these results are clear for microinsurance providers; using negative framing when marketing their product will increase take-up rates more than using positive framing. In extension, given the inherent positive welfare effects steaming from increased microinsurance take-up rates in low-income countries, this paper provides valuable insights to the poverty alleviation literature.