HOUSEHOLDS’ WILLINGNESS TO PAY FOR NATURAL HAZARD INSURANCE IN THE SOUTHWESTERN COASTAL REGION OF BANGLADESH

Abstract

The southwestern coastal region of Bangladesh is enormously susceptible to natural hazards due to global environmental change, triggering economic instability in coastal households every year. Hazard microinsurance might be a decent option to build financial resilience; considering the assorted consumers’ preferences is essential for policy scheming. Therefore, this research estimated households’ willingness to pay (WTP) for natural hazard insurance (NHI) in Bagerhat Sadar and Rampal upazila of Bagerhat district in southwestern coastal Bangladesh. The contingent valuation method’s double-bounded dichotomous choice (DBDC) technique was exerted on the 120 randomly interviewed households’ dataset to estimate the WTP for NHI considering three experimental bid values (i.e., initial bid of BDT 300, maximum bid of BDT 500, and lower bid of BDT 200 as the NHI premium per month). This assessment revealed that, on average, around three-fourth of coastal household experienced financial losses (i.e., damage to crops, fish-shrimp enclosures, integrated farms, and houses) yearly due to natural hazards. Almost two-third of the total sample was interested in taking such alternative financial support after a massive coastal hazard, and the mean WTP was approximately BDT 284. Amongst those households, more than four-fifth were willing to pay for the initial bid value. Moreover, a logit analysis was performed to identify WTP’s probability and maximum likelihood; the Pearson goodness-of-fit test to estimate the chi-square ( =5.29; p<0.01) value; and Kendall’s tau-b ( ) test to clarify the level of significance and associations [Highest correlation-coefficient (WTP and initial bid) =0.837**; **p<0.01; strongly associated; optimal value] between WTP and three experimental bid values. Besides, this research has attempted to give policymakers a vivid understanding of households’ behavior in adopting such microinsurance. Government and development agencies are highly recommended to implement such a microinsurance scheme as post-hazard economic facilitation for coastal victims.