A Research on Demand of Agricultural Insurance: Evidence from Hubei Province China

The efficiency of government subsidy for promoting agricultural insurance program has long been discussed. A fundamental issue to this problem is about the farmers' demand of agricultural insurance. What is the most-worried problem in a farmer's life? Do they really need agricultural insurance? If yes, how much are they willing to pay; if not, what are the reasons? What are the main factors that affect the participation decisions of the farmers? Our research use survey data from 501 households in Hubei province, China to analyze the demand of agricultural insurance and answer the above questions. There are four main conclusions in this paper. First, farmers worried about farming-related natural disaster more than any other risks though many of them do not know how to deal with the natural disaster risk. Second, 82.65% of the farmers think they do need agricultural insurance, the reasons why the other do not need mainly include enough off-farm income, superior geological position or low input. Most of the farmers who have already purchased agricultural insurance intend to continue their contract. 64.5% of those who have not participated hope to have a try. Those who do not participated mainly consider about reliability of the insurance company or their own financial status. Third, perception of risk, knowledge about agricultural insurance and the percentage of the farm income in total income are the most significant factors that influence farmers' participation decision. Education level of the respondents also plays a role. Fourth, the WTP of agricultural insurance is closely related to the main sustenance of the farmers and has a positive relation with the total family net income.