Willingness-to-pay for parametric weather insurance in Vietnam

Parametric agricultural insurance for smallholder farmers is currently being discussed by decision-makers with great expectations. It is hoped that parametric insurance is an effective, scalable and cost-efficient tool to increase the resilience of smallholder farmers in the global South to extreme weather events. Nevertheless, the demand for weather insurance remains at a low level. One possible reason for the low demand could be that smallholder farmers' willingness to pay is below the price of insurance.

The research project Willingness-to-pay for parametric weather insurance in Vietnam examines the willingness to pay of smallholder households in Vietnam for parametric insurance against extreme rainfall. The aim is to gain insights in two dimensions: First, a Becker-DeGroot-Marschak model is used to determine the price distribution that smallholder farmers in Vietnam are willing to pay for a recently introduced heavy rainfall insurance policy. Second, it is analyzed to what extent socioeconomic factors influence households’ willingness to pay.