Factors Influencing Farmers’ Willingness to
Purchase Weather Insurance: Experimental Results from
Shaanxi and Gansu Provinces

KONG Rong, Calum G Turvey, SUN Lihui

College of Economics and Management, Northwest Agricultural and Forestry University
Department of Applied Economics, Cornell University, Ithaca NY14853, USA

Abstract:
China frequently suffers from weather related natural disasters and is a source of wide-spread systemic risk throughout large swaths of China. During these periods farmers’ crops are at risk and for a largely poor population few can afford the turmoil to livelihoods that goes along with drought. Throughout the developing world there is serious interest in index-based weather insurance for agriculture, and in China the China Insurance Regulatory Commission is investigating the insurability of weather related risk. Beyond that little formal research has appeared on the demand, use or design of index insurance in China. This paper provides a preliminary assessment of farmers’ willingness to pay for drought insurance. Based on a survey of over 890 farm households in Shaanxi and Gansu provinces the results show that while there is significant demand, price may be an issue. Our results show that the majority of farm households would transition from a no-demand state to a demand state as prices fall. This suggests that in order to gain wide gain adoption there may be a need for governmental intervention.

Keywords: Farm household；Weather insurance；Purchase willingness；Influence factors