Assessing the relationship between farmers^ willingness to pay and their perceptions of agricultural insurance: Insights from Kulon Progo, Indonesia Fadilla Ristya Aminda1, Dhika Cahyasita1*, Mawar Kusumawardani2, Septiara Dewi Hapsari1, Arya Dwi Janarko1, Mei Wijayanti1, Firman Eka Yuantoro1
1Agribusiness Study Program, Faculty of Agriculture, Universitas Pembangunan Nasional Veteran Yogyakarta
2Soil Science Study Program, Faculty of Agriculture, Universitas Pembangunan Nasional Veteran Yogyakarta
Abstract
Designing efficient insurance products and policies requires an understanding of farmers^ perceptions of insurance given the growing risks associated with rice production, such as pests, illnesses, and climate variability. The Ministry of Agriculture on behalf of the government launched the Rice Farming Insurance program to provide at-risk farmers with protection against damages resulting from climatic unpredictability. With the government subsidies covering 80% of the premium value, the program hasn^t been performing at its best, though. The purpose of this study is to ascertain how much farmers are willing to pay for the insurance plan. Furthermore, this study aims to investigate the relationship between farmers^ willingness to pay and their perceptions of agricultural insurancee. A structured survey was conducted among 49 rice farmers in Kulon Progo, Indonesia. Willingness to pay estimation was carried out using the contingency valuation approach (CVM) method through bidding techniques. The association between their impressions of agricultural insurance and their willingness to pay was investigated using statistical analysis, which included correlation tests. The findings demonstrated a positive correlation between the respondents^ willingness to pay for rice farming insurance and their opinions on agricultural insurance. More specifically, farmers are more likely to be willing to pay for agricultural insurance if they believe it to be reliable and effective. This underscores the importance of addressing climate-related risks through insurance mechanisms and suggests policy implications to support farmers in managing climate uncertainty. Most farmers are only willing to pay premiums equal to IDR 36,000 per hectare per planting season. Thus, government subsidies for rice farming insurance premiums are still needed.
Keywords: Willingness to pay- agricultural insurance- climate variability- farmers- risk and uncertainty
