Agriculture sector is the main source of livelihood in Sub-Saharan Africa. The sector employs over 65% of the labour force, of whom 80% are smallholder farmers using poor technologies and relying heavily on family labour. Besides being low, incomes of farmers and agricultural workers experience seasonal fluctuations, and households use insurance institutions to smooth consumption. Insurance institutions are formal or informal, and particular institutions offer differing incentives to households. This thesis investigates incentives pertaining to insurance institutions and finds that policy interventions to improve market outcomes of the poor should not focus on introducing complementary institutions, but rather on supporting cooperation and information programmes to enhance bargaining position of the poor.