Exploring farmers’ willingness to pay for crop insurance products: A case of weather-based crop insurance in Punjab, India

Aditya, Kaustav; Kishore, Avinash; Khan, Tajuddin

doi:10.5958/0974-0279.2020.00027.0

Cited by 14 publications

(12 citation statements)

References 21 publications

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“…lower insurance demand, in line with the findings of Aditya et al [13] in India. Abugri et al [25] and Dougherty et al [26] suggest that the low uptake rate is because farmers underestimate weather risk in Ghana and Tanzania, respectively, whereas Maganga et al [27] argue that it largely depends on the associated premiums in Malawi.…”

Section: Methodology and Data Collectionsupporting

confidence: 90%

“…Literature has extensively explored the effectiveness and determinants of WII. Leblois et al [24] show that insurance could not cover an insured farmer's risk in Niger, which results in a lower insurance demand, in line with the findings of Aditya et al [13] in India. Abugri et al [25] and Dougherty et al [26] suggest that the low uptake rate is because farmers underestimate weather risk in Ghana and Tanzania, respectively, whereas Maganga et al [27] argue that it largely depends on the associated premiums in Malawi.…”

Section: Literature Reviewsupporting

confidence: 55%

“…Moreover, Cole et al [4] demonstrate that insurance demand is price sensitive. Consistently, Aditya et al [13] also show that farmers are willing to pay for crop insurance, but would pay less than the required premium based on existing rates. This is because the premium only insures 75% of the threshold value of farmers' crops.…”

Section: Literature Reviewmentioning

confidence: 88%

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Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers

Wang

Soksophors²,

Barlis

et al. 2022

Sustainability

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This study examines Cambodian rice farmers’ willingness to pay for the weather-indexed insurance (WII) proposed to manage the financial impact of shifting monsoon rainfall patterns in Battambang Province in north-western Cambodia. Detailed interviews are conducted in the districts of Bavel and Thma Koul. We first analyse farmer respondents’ socioeconomic and demographic characteristics, climate change perceptions and experience, risk attitudes, and awareness of insurance. The binary logistic model is used to identify factors that significantly impact farmers’ willingness to pay (WTP) for WII. Our results show that farmers in general had lower awareness of how to use innovative financial products to adapt to extreme weather. The results also demonstrate that farmer respondents’ marital status, the number of off-farm labourers, and the farm size have a positive effect, whereas the number of children in the household has a negative effect on farmers’ WTP for WII. Specifically, being married, an increase of one off-farm labourer, and an increase of one hectare (ha) of farmland increase the probability of demand for WII by 38.6%, 21.4%, and 5.1%, respectively. In contrast, an increase of one child reduces the probability of WII demand by 9.7%. We also identify challenges confronted by Cambodian farmers for participating in the proposed WII scheme and provide relevant recommendations to overcome these challenges.

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Section: Methodology and Data Collectionsupporting

confidence: 90%

Section: Literature Reviewsupporting

confidence: 55%

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Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers

Wang

Soksophors²,

Barlis

et al. 2022

Sustainability

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“…The agriculture industry has lagged in the use of weather derivatives, but now, because of concerns with climate change, they may be of increasing interest on the part of producers (McCarthy, 2003; Turvey and Kong, 2010; Ali, 2013). Increased weather volatility, accompanied by increasing growing days, is becoming commonplace throughout the world, including the Niagara region (Adelsheim et al, 2016; Shaw, 2017).…”

Section: Ontario Grape and Weather Environmentmentioning

confidence: 99%

Potential use of weather derivatives in hedging aggregate viticulture yields: An analysis of the Niagara region of Canada

Cyr,

Kushner,

Zhang

2023

J Wine Econ

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Although potentially useful for financially hedging systemic weather-related risks, weather contracts/derivatives (also referred to as parametric insurance) have not seen wide adoption in agriculture outside of applications in developing countries, frequently supported by governments and non-governmental organizations (NGOs). A significant impediment is the lack of financial firms willing to stand ready to sell weather derivatives to individual agricultural producers in the over-the-counter market who, due to the localized nature of weather, face idiosyncratic weather-related risks. In particular, the administrative and reinsurance costs of supplying relatively small contracts with specific terms to many different producers are often prohibitive. The current study considers the potential use of weather derivatives in hedging the aggregate yield/revenues of viticulture producers represented by an industry association located in the province of Ontario, Canada. We examine the sensitivity of aggregate industry yields to several relevant weather-related risks employing copula function analysis. We then consider the potential of a weather derivative in hedging the financial risk associated with cold winter temperatures, which pose the greatest risk to aggregate vinifera yields. The issue of attributing costs and payouts to individual association members remains unresolved, and several alternatives are suggested.

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“…In developed countries, governments have identified agriculture insurance as one of the ways to de-risk the agriculture sector and reduce vulnerability of farmers and other value chain actors. However, the adoption of agriculture insurance in most developing countries as a risk mitigation measure has failed to reach scale due to many challenges (Aditya, Kishore & Khan, 2020). These include inadequate risk assessment and profiling; inadequate capacity for risk assessment and profiling, inadequate and unreliable data for agriculture insurance.…”

Section: Introductionmentioning

confidence: 99%

Capacity Building for Agriculture Insurance: Lessons From Developed Economies

Kajwang¹

2022

AJA

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Purpose: Agricultural insurance has been offered in some developed economies for more than a century. In contrast, the sector remains underserviced in low and middle-income economies. Penetration of agricultural insurance exceeds 1 percent in developed economies but in low and middle- income countries, the agricultural insurance penetration is less than 0.3 percent. The gap between the penetration of non–life insurance and agricultural insurance increases as development status decreases. The purpose of this research work is to outline lessons from developed economies on how capacity building for agriculture insurance is done. Methodology: Relevant books references and journal articles for the study were identified using Google Scholar. The inclusion criteria entailed papers that were not over five years old. Findings: The study findings showed that insurance company’ in enveloped economies sell crop insurance policies through financial institutions or cooperatives, which are particularly important in marketing crop hail insurance. It was also found that in the developed economies, there is a national climate change policy as a means of capacity building for agriculture insurance. This policy helps the government to plan for training of staff and policymakers on how to advise farmers to take agricultural insurance. This policy also help in enhancement of the administrative and technical capacity of government institutions responsible for handling climate change related issues that affect agriculture insurance Recommendations: The study recommend policymakers in developing countries to focus on imperfections on the pricing of agricultural insurance products. This will help policymakers designing public support programs aimed at reducing the cost of insurance thus developing insurance products that are attractive and affordable to farmers and financially viable and sustainable for insurers. The study also recommend developing countries to embrace modern insurance pricing approaches that are based on the credibility theory such as the experience-based approach. This approach has been promoted in several developed countries to cover systemic risks because it allows for the adjustment of the expected loss based on additional credible information such as insured losses of other products. The study further recommend developing countries to promote insurer- insured partnerships.

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Exploring farmers’ willingness to pay for crop insurance products: A case of weather-based crop insurance in Punjab, India

Cited by 14 publications

References 21 publications

Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers

Willingness to Pay for Weather-Indexed Insurance: Evidence from Cambodian Rice Farmers

Potential use of weather derivatives in hedging aggregate viticulture yields: An analysis of the Niagara region of Canada

Capacity Building for Agriculture Insurance: Lessons From Developed Economies

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