Farmers’ Demand for Informal Risk Management Strategy and Weather Index Insurance: Evidence from China

Abstract

In the absence of formal risk management strategies, agricultural production in China is highly vulnerable to climate change. In this study, field experiments were conducted with 344 households in Heilongjiang (Northeast China) and Jiangsu (East China) Provinces. Probit and logistic models and independent sample T-test were used to explore farmers’ demand for weather index insurance, in contrast to informal risk management strategies, and the main factors that affect demand. The results show that the farmers prefer weather index insurance to informal risk management strategies, and farmers’ characteristics have significant impacts on their adoption of risk management strategies. The variables non-agricultural labor ratio, farmers’ risk perception, education, and agricultural insurance purchase experience significantly affect farmers’ weather index insurance demand. The regression results show that the farmers’ weather index insurance demand and the influencing factors in the two provinces are different. Farmers in Heilongjiang Province have a higher participation rate than those in Jiangsu Province. The government should conduct more weather index insurance pilot programs to help farmers understand the mechanism, and insurance companies should provide more types of weather index insurance to meet farmers’ diversified needs.

Keywords

China / Informal risk management strategies / Natural hazards and disasters / Weather index insurance

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