One Size Policy Does Not Fit All: Latent Farmer Groups in Crop Insurance Markets in Finland

Abstract

This paper assesses how farmers differ in their willingness to pay (WTP) for crop insurance. Data from a choice experiment were analysed using the latent class approach to reveal the number of latent groups and differences in farmers' WTP for crop insurance in Finland. The analysis identified three homogeneous groups that differed significantly from each other. Farmers in these classes were characterized as 'catastrophic loss preventers', 'risk lovers' and 'shallow loss preventers' based on their implicit prices for insurance attributes. The outputs provide valuable information when these latent groups are connected to farm typology. The results indicate that the EU Common Agricultural Policy (CAP) is not sufficiently flexible to take into account the differing needs of farmers for agricultural risk management. If the EU is to implement efficient risk management policies for agriculture, flexibility will be needed in the legislation, and shallow loss insurances will also need to be introduced to cover all risk prevention needs equally.

Factors Influencing the Take-Up of Agricultural Insurance and the Entry into the Mutual Fund: A Case Study of the Czech Republic

“…Different agricultural models can lead to different approaches to agricultural risk management systems. CAP is not flexible enough to accommodate farmers' different agricultural risk management (Myyrä and Liesivaara 2015). Differences on the demand and supply side of the crop and livestock insurance market point to different policy approaches to the role of agriculture in EU countries (Soliwoda et al 2017).…”