The effect of information unshrouding on financial product purchase decision

Individuals are often unable to discern different features of financial products and
become victims of aggressive and shrouded sales practices. We estimate the impact
of an instrument-specific education video on the intention to purchase a sub-optimal
insurance product in Delhi, India. The video highlights questions individuals should
ask before making a purchase and specific rules of thumb to evaluate the answers to
those questions. Our intervention results in a three percentage points increase in the
intention of not purchasing the sub-optimal product. Our effects are driven mainly
by an increase in product feature knowledge, suggesting that individuals are more
informed after watching the rules-of-thumb video, making better choices. A calibration
exercise suggests that this impact is sufficient to push the market from a shrouded to
an unshrouded equilibrium, suggesting that not all uninformed individuals need to act
on financial education to improve information provision in retail product markets.

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