Analysis of the Demand for Weather Index Agricultural Insurance on Household level in Anhui, China

AbstractAs an innovative tool, weather index agricultural insurance (WIAI) was introduced into China in 2008. Before product designing and selling to farmers, it is necessary to understand farmers’ real desire so that the product can be tailored to fit their needs. This paper focuses on the demand analysis for WIAI on household level. With this goal, 660 households located in 22 administrative villages in Changfeng and Huaiyuan county, Anhui province, China were surveyed. Survey questions covered risks faced by households, their coping mechanisms and willingness to pay for WIAI. Survey data were assessed and findings are shown as below: drought and flood were major weather risks for crops; the key coping strategies to crop loss were seeking employment elsewhere, or borrowing money from relatives or friends; most of investigated farmers showed interest in WIAI; those who were more familiar with insurance, or whose losses were higher due to deficient or excessive rainfall, or who had more trust in the accuracy of local weather forecasts, expressed more interest in WIAI with the quite low correlation coefficient, while statistically significant. It hints that there are potential demands for WIAI among farmers. However, methodologies deserve further development so as to provide more reliable assessment of the relationships between the willingness to pay and the abovementioned three factors