Impact Insurance Research Paper #39: Can debiasing provided over the internet improve consumer financial decisions?

Over the last few decades, the Indian population has gained access to an increasing array of insurance and investment options. While financial markets promise to facilitate the higher average long-run return in equity markets make them an attractive avenue for wealth accumulation, limited understanding of complex financial markets often may causes people to save in sub-optimal instruments. In particular, the apparent safety, money-back features and tax-breaks associated with whole life insurance products have led a large fraction of Indians to save in these products. In fact, these consumers may be much better off buying term policies and investing the difference in premiums directly in financial markets. The authors identify several barriers to optimal financial decision-making and experimentally test whether barrier-specific financial advice messages can help consumers make better investment decisions. They conduct online experiments both in the U.S. and in India, and conclude that information alone is not sufficient; subtle de-biasing message have only limited and non-significant impacts on the India sample.