Do farmers always choose agricultural insurance against climate change risks?

Abstract

In response to climate change, many countries are introducing agricultural insurance. But will farmers buy more agricultural insurance as climate change deepens? The literature has shown that climate change has a significantly positive impact on agricultural insurance. Using data from China over the period 2012–2021, we examine the effects of climate change (CC) on agricultural insurance coverage (AIC). We find that CC does not always have a positive impact on AIC; instead, farmers’ insurance choices depend on the difference between their total costs and earnings. Only when total earnings are greater than total costs will farmers choose agricultural insurance. Compensation and subsidies are components of total earnings and premiums are components of total costs. They are affected by the government's insurance policies and charging standards and insurance companies' compensation schemes. This study examines the factors that affect farmers’ insurance choices and recommends strategies for improving agricultural insurance.