Farmers’ Willingness to Pay for Index-Based Livestock Insurance in the North West of South Africa

Abstract

Rural livelihoods in most developing countries are threatened by climate-related risks such as drought, flood, heat waves, storms, and so on. Although farmers have adopted several adaptation strategies, they have proven less effective than hoped. Hence, index-based livestock insurance, an innovation that significantly assists farmers to acclimatise to climate-related risks, has been proposed; and its adaptability has attracted a notable increase in other African countries. However, the success of its adoption is dependent on the inclination of the farmers to pay for the service. Accordingly, this study investigates their willingness to pay for index-based livestock insurance and its determinants, and the factors influencing the total livestock units to be insured in the North West province of South Africa. Cross-sectional data were obtained from 277 cattle farmers, drawn randomly from the study area. The contingent valuation method was applied to determine the farmers’ willingness to pay; and only 10.8% were willing to pay. Simultaneously, the Heckit sample selection model was used to analyse the data to identify the factors responsible for farmers’ willingness to pay and total livestock units to insure. The findings revealed that farmer’s experience, age, education, marital status, awareness of insurance and household dependents were statistically significant, and influenced the maximum price R600 ($42, max willingness to pay, WTP) of those who accepted index-based livestock insurance. However, by implication, the study concluded that to adopt index-based livestock insurance in the study area among the livestock farmers, there should be policies to cater for the aforementioned factors.

Determinant Factors for Cattle Insurance as a Risk Management Strategy

“…Several factors that influence the farmers' WTP on cattle insurance significantly include age, number of families, non-livestock income, and participation in cattle insurance. Age has a negative relationship with the willingness to pay for cattle insurance (-0.823) and highly significant (p-value of 0.000); it indicates that young farmers are more willing to pay higher insurance than older farmers, this result support previous research Oduniyi et al, (2020). Older farmers being hesitant and slow in adopting new programs, resulting in their reluctance to pay for insurance, this is also confirmed by (Kakumanu et al, 2012;Sadati et al, 2010).…”

Willingness to pay for private health insurance among workers with mandatory social health insurance in Mongolia

“…The option of financial protection mechanism is very limited and remains a formidable challenge, particularly in developing countries [39]. Empirical results from early studies suggest that demand for health insurance is affected by education [22] and income levels, and the male gender is associated with a higher willingness to pay (WTP) [23,24]. This prompted us to investigate differences in WTP by gender in Mongolia during the transition period when women had a higher education level [25] but lower wage and fewer job opportunities than men [26].…”

“…The working population in Ulaanbaatar in 2018 was estimated by the NSO to be 555,350 people, with 303,544 men and 251,806 women. The sample size n for our study was determined using Slovin’s formula for a known population [ 23 , 24 ]: …”

Economic Risk Assessment by Weather-Related Heat Stress Indices for Confined Livestock Buildings: A Case Study for Fattening Pigs in Central Europe

“…It pays out, based on an index such as the HS index, calculated by meteorological data from a local weather station, rather than based on a consequence of weather, such as a reduction of the average daily gain or the mortality of the livestock. Most of the weather index-based insurances are configured to the grassland keeping of animals and the impact of the availability of feed, mostly for extensive livestock production in India [72], Iran [73,74], Ethiopia [75,76], South Africa [77] and for tropical areas [78].…”