Climate change skepticism and index versus standard crop insurance demand in coastal Bangladesh

Abstract

This paper investigates if climate change skepticism, farmers' fatalistic beliefs, and insurance plan design influence interest in crop weather insurance. While studies of the influence of fatalism on disaster preparedness are common, the ways in which fatalism influences climate change skepticism, and in turn affects farmers' interest in crop insurance, have not been previously investigated. An additional objective was to understand farmers' preferences for index versus standard insurance options, the former entailing damage compensation based on post-hazard assessment, the latter tying damage compensation to a set of weather parameter thresholds. A discrete choice experiment was conducted with maize farmers on a climate-risk prone island in coastal Bangladesh. Most farmers were insurance averse. Those who chose insurance were however significantly more likely to select standard as opposed to index-based insurance. Insurance demand was significantly and positively correlated with farmers' concern about the adverse livelihood impacts of climate change. Farmers who exhibited fatalistic views regarding the consequences of climate change were significantly less likely to opt for insurance of either kind. These findings imply that the prospect for farmers' investment in insurance is conditioned by their understanding of climate change risks and the utility of adaptation, in addition to insurance scheme design.

Building Coastal Agricultural Resilience in Bangladesh: A Systematic Review of Progress, Gaps and Implications

“…Firstly, farming innovation, which includes the introduction of varieties of rice, which are salt-tolerant and high yield [43,48]. Secondly, financial innovation such as weather-index insurance, crop weather insurance and the provision of agricultural credit [65,74]. Thirdly, innovations in climatology and weather forecasting, which include area-specific weather forecasting [74].…”

“…Secondly, financial innovation such as weather-index insurance, crop weather insurance and the provision of agricultural credit [65,74]. Thirdly, innovations in climatology and weather forecasting, which include area-specific weather forecasting [74]. All of these innovations are likely to be important for improving the resiliency of agriculture.…”

“…There is a range of barriers and challenges, which hinder the planning and implementation of climate adaptation measures to building systemic resilience. Based on the literature review, the major barriers to climate change adaptation and resilience-building in the coastal areas of Bangladesh are as follows: (i) Poverty and inequality [39,44,64]; (ii) complexities of the impacts and vulnerabilities [7,69]; (iii) unsustainable management of natural resources [39,47]; (iv) lack of insurance [74,81]; (v) lack of knowledge and training in adaptation practices [61,64,72]; and (vi) poor planning and institutional capacity [35,51,61,63].…”

“…Insurance schemes help farmers to farm with an element of security, which helps to build resilience in their farming system. However, Akter et al [74] suggest that most farmers are either insurance averse or their investment in insurance is conditional on climate change risks and the utility of adaptation. Moreover, the existing insurance scheme design is complex, and the inclusion of the most vulnerable variables further limits the uptake of crop weather insurance [74].…”

Measuring farmers’ preferences for weather index insurance in the Ayeyarwady Delta, Myanmar: a discrete choice experiment approach

“…In fact, DCEs and CVs have been used to measure farmers' preferences or demands for WII in developing countries, including Bangladesh (Akter et al 2016), Ethiopia (McIntosh et al 2013Castellani et al 2014;Tadesse et al 2017), Ghana (Adjabui et al 2019), India (Ward and Makhija 2018), and Kenya (Sibiko et al 2018). 2 Previous studies have focused on a drought-based WII system for rice production in an area of India (Ward and Makhija 2018) and an inundation-and (hail or wind) storm-based WII system for maize production in a coastal area of Bangladesh (Akter et al 2016(Akter et al , 2017; however, farmers' preferences for these WII systems may not be suitable for the Ayeyarwady Delta area of Myanmar, where natural disasters such as saltwater and cyclone have affected farming. To the best of our knowledge, the only previous study that focused on farmers in the Ayeyarwady Delta area of Myanmar was conducted by Gu (2018), which reports the results of preliminary DCE questions gathered as part of the baseline survey for the project.…”