Willingness to Pay for Cattle Insurance in Nepal: A Double-Hurdle Model Perspective

Abstract

Since the adoption of the Crop and Livestock Insurance Directives in 2013, the adoption of livestock insurance has gained popularity in Nepal. In the eight years since implementation, adoption rates have remained low, even with 80% government premium subsidies. This study uses a double-hurdle model for quantitative analysis and focuses on the determinants of willingness to pay (WTP) for cattle insurance. The research identifies significant factors influencing insurance adoption decision, including positive impacts from farmer’s age, education, livestock loss history, awareness of insurance, dairy farm income, number of cattle, and loan access. However, male gender, extensive cattle rearing experience, and larger households negatively affect willingness to insure. A number of factors affect premium determination, including age, size of household, livestock loss, off-farm income, number of cattle, and loan accessibility; on the other hand, factors that have a negative impact on premium levels include breed type, marital status, and revenue from dairy farms. According to the findings, the annual WTP for cattle insurance among dairy farmers varies from $48 to $71 (NRs. 6315-9341), with an average of $58 (NRs. 7631). Interestingly, the majority of farmers demonstrate their commitment to risk management by accepting premiums equal to 5% of the value of the cattle. The research contributes to understanding livestock insurance premiums in developing countries, specifically in Nepal, and suggests a scope for extending insurance programs, while also noting a gap in awareness among dairy farmers regarding government subsidy programs.