Abstract
This study examines farmers’ preferences for weather index insurance (WII) in the Ayeyarwady Delta, Myanmar, using discrete choice experiments. It employs data taken from a survey of 317 rice farmers in the district of Labutta in the Ayeyarwady Region, which was conducted in March 2019. After being informed about WII and the trigger conditions, farmers were asked to answer discrete choice questions on WII packages. The hypothetical WII packages consisted of three attributes: the types of disaster that the insurance covers, the insurance coverage rate, and the annual insurance premium rate. A random parameter logit model analysis of the responses reveals that farmers prefer the WII packages covering cyclones, floods, and droughts to that for salt damage. The probabilities of selecting 64 hypothetical WII packages calculated from the estimates indicate that more than 50% of farmers can be expected to purchase seven WII packages for cyclones, floods, and droughts.
Highlights
Global climate change may have significant negative impacts on farm management
Some farmers displayed a positive value for salt damage, meaning that they prefer a weather index insurance (WII) package for salt damage than for one or more of the remaining WII packages for cyclones, floods, and droughts, since the estimate for salt damage could be defined as a negative summation of those for the three effectcoded disaster type variables
This study examines farmers’ preferences for WII among rice farmers in the Ayeyarwady Delta area of Myanmar using discrete choice experiments (DCEs)
Summary
Global climate change may have significant negative impacts on farm management. In this regard, crop insurance could mitigate the raised weather-related risk, as farmers who purchase insurance will receive a payout from their provider if their yields decrease due to any natural disaster specified in the insurance contract. The weather index insurance (WII) is thought to reduce inherent inefficiencies in crop insurance within developing countries (Collier et al 2009). WII can reduce transaction cost because farmers who purchase WII in advance will receive an insurance payout regardless of the extent of their crop loss whenever the weather in their area meets predefined, measurable trigger conditions (e.g., monthly rainfall throughout a dry season being less than 50 mm). WII can avoid moral hazard because farmers cannot control
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