Small Farmers’ Preferences for Weather Index Insurance: Insights from Kenya

Kenneth W. Sibiko, Prakashan Chellattan Veettil () and Matin Qaim

No 246399, 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia from African Association of Agricultural Economists (AAAE)

Abstract: Smallholder farmers are particularly vulnerable to climate shocks but often lack access to agricultural insurance. Weather index insurance (WII) could reduce some of the problems associated with traditional, indemnity-based insurance programs, but uptake has been lower than expected. One reason is that WII contracts are not yet sufficiently tailored to the needs and preferences of smallholders. This study combines survey and choice-experimental data from Kenya to analyse the experience with an existing WII program and how specific changes in contractual design might increase insurance uptake. Many smallholders struggle with fully understanding the functioning of the program, which undermines their confidence. Better training and communication are needed. Regular provision of relevant rainfall measurements and thresholds would significantly increase farmers’ willingness to pay for WII. Mechanisms to reduce basis risk are also valued by farmers, although not to the same extent as higher levels of transparency. Finally, offering contracts to small groups rather than individual farmers could increase insurance uptake. Group contracts may help to reduce transaction costs. Farmer groups can also be important platforms for learning about complex innovations, including novel risk transfer products. While the concrete results are specific to Kenya, they provide some broader policy-relevant insights into typical issues of WII in a small-farm context.

Keywords: Environmental Economics and Policy; Farm Management; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 34
Date: 2016-09
New Economics Papers: this item is included in nep-agr, nep-dcm, nep-env and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ageconsearch.umn.edu/record/246399/files/1 ... nce%20in%20Kenya.pdf (application/pdf)

Related works:
Working Paper: Small Farmers' Preferences for Weather Index Insurance: Insights from Kenya (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaae16:246399

DOI: 10.22004/ag.econ.246399

Access Statistics for this paper

More papers in 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia from African Association of Agricultural Economists (AAAE) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().