Abstract
<p>In 2007 the Chinese Ministry of Finance (CMF) approved the pilot agricultural insurance subsidy program, which tremendously promoted the growth of the agricultural insurance market. However the insurance adoption rate is still low comparing to that of developed countries. The main objective of this paper is to investigate factors most influence growers’ crop insurance adoption decisions. To this end, we adopt a double-bounded dichotomous choice (DBDC) experiment. This bidding experiment is conducted through extensive in-person interviews with over 300 rural households in west China, Szechwan province. By using the maximize likelihood method we empirically estimate the effects of factors such as landholding, income and farming experience on the farm-level crop insurance demand. Results indicate that the majority (53 per cent) of rice growers are willing to pay a high crop insurance premium above ¥10 ($ 1.7). On the other side, about 23 per cent of growers value the crop insurance below ¥2 ($ 0.34). As expected, the effects of landholding, education and income are all positive and statistically significant. However, household size and farming experience adversely affect the insurance adoption decisions.</p>
Highlights
The national agricultural insurance premium volume has been increasing steadily in China, entitling it the world’s second largest agricultural insurance market (World Bank, 2010)
In 2007 the Chinese Ministry of Finance (CMF) approved the pilot agricultural insurance subsidy program, which tremendously promoted the growth of the agricultural insurance market
The main objective of this paper is to investigate factors most influence growers’ crop insurance adoption decisions
Summary
The national agricultural insurance premium volume has been increasing steadily in China, entitling it the world’s second largest agricultural insurance market (World Bank, 2010). The premium volume was estimated to be $91 million in 2005, which tremendously increased to $2.89 billion in 2011 This recent expansion can partially be attributed to the pilot subsidy program approved by the Chinese Ministry of Finance (CMF) in 2007. With the expenses be borne by central and local governments, the subsidy rate is substantially higher than the average rate for most countries (World Bank, 2010). Despite such efforts and progress, the insurance adoption rate has not yet achieved the expectation, with an average of 40 per cent, and as low as 10 per cent in some interior rural regions. Revealing growers’ preferences helps to identify the market potential and to design comprehensive indemnity schemes that can be accessible by rural households
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