Abstract
The purpose of the paper is to compare population of farmers that bought crop insurance with farmers that are uninsured. Based thereon, the author identified features characterizing the insured farmers. These findings were applied to draw more general conclusions concerning factors influencing the insurance awareness and propensity to buy insurance coverage. Demographic, social and economic criteria, individual perception of risk, the loss ratio, and the willingness to pay the insurance premium were taken into consideration. Empirical research is based upon a sample of 150 Polish farmers that were interviewed using the CATI approach. It was found that farms with greater production volume (annual income) and with a larger crop area present higher willingness to buy insurance. Farmers who experienced damage to crops are more inclined to buy insurance coverage. Moreover, higher insurance penetration rate can be found among farmers who are willing to pay a higher price for a crop insurance policy. Surprisingly, despite frequently formulated assumptions, variables such as age of farmer, level of education or individual perception of risk do not determine the decision on insurance purchase.
Highlights
The notion of risk management is present in the modern market economy in numerous semantic versions, contexts and practical applications which does not make it easy to develop a consistent concept and structure of the risk management process
The conducted empirical research showed the complexity of the issue of crop insurance purchase decision-making
The higher propensity to manage natural perils using risk transfer mechanism can be found among farmers with greater crop production potential, both in terms of the area of farmland as well as earned annual income from crop production
Summary
The notion of risk management is present in the modern market economy in numerous semantic versions, contexts and practical applications which does not make it easy to develop a consistent concept and structure of the risk management process. Selecting the method of risk financing by a specific entity may depend on factors such as: the frequency of damage, the size of damage, financial resources and the size of an organization, and the cost of insurance (Baranoff, 2000). Insurance is believed to be the most proper technique of risk financing regarding the catastrophic risk (Rejda, 2008). Many farmers do not buy crop insurance despite the high risk exposure in agribusiness (Kunreuther, 1984, 1996; Kunreuther, Meyer and Michel-Kerjan, 2013). This paradox rises an interesting research question about motives and determinants of crop insurance purchase. There is a need for extensive empirical study that could provide policymakers with relevant insights into this issue
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