An empirical study of the key factors affecting herders' purchasing decision on weather index insurance—A case study from inner Mongolia autonomous region, China

Abstract

The weather index insurance for mutton sheep (WIMS) is the first weather index insurance product that addresses the increased feeding cost-related risk of grassland animal husbandry herders in China. In 2019, the WIMS was implemented as a pilot project in 11 county regions of Xilin Gol League, Inner Mongolia, China. Since the implementation of this product, the purchasing rate has varied from region to region, as the highest purchasing rate was 84.3%, while the lowest was only 1.8%. This research uses the double hurdle model to identify the factors affecting herders' purchasing behavior. This paper reports a survey study of 535 participants herders in the Xilin Gol League. The result indicates that herders' age, disaster risk evaluation, insurance awareness, pasture area, and neighborhood purchasing decision significantly impact herders' purchasing propensity. Disaster evaluation, insurance awareness, pasture area and location significantly impact the purchasing degree of herders. The study suggests that young herders and herders with large pasture areas should be motivated to purchase insurance. In addition, new methods should be applied for the publicity of this insurance product; Investments should be focused on the automatic weather monitoring station projects in pastoral areas to reduce the basis risk of the insurance.