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Abstract:
Agricultural insurance is considered a promising instrument to manage climate risks and to enhance the food security of smallholder farmers. However, despite some positive evidence that insurance positively affects farmers' production strategies, consumption smoothing, asset protection, and asset recovery, the specific effect of insurance on farm households' dietary diversity is largely unexplored. Often, positive effects on dietary diversity are presumed through income gains that might arise from investment returns of profitable production activities and cash gains from payouts. We argue that there exist multiple other causal mechanisms through which insurance may even negatively influence farm households’ dietary diversity. The current article elaborates these mechanisms and provides recommendations on ways to avoid unintended negative effects on dietary diversity which should be taken into account by governments and donors if they continue to further promote insurance.
