Willingness to pay for livestock insurance by dairy farmers in Kavrepalanchowk district, Nepal

Abstract

Dairy production is one of the risky businesses, which seeks effective risk management strategies. Adoption of a livestock insurance scheme is one of the most effective risk management strategies for dairy entrepreneurs. However, in Nepal, insurance coverage is very low in the dairy sub-sector. The study aimed to assess the dairy farmer’s willingness to pay for the livestock insurance scheme. The study was carried out in Kavrepalanchowk district of Nepal in 2022. The simple random sampling technique was used to select 146 dairy farmers. Double Bounded Dichotomous Choice Contingent Valuation technique was used to estimate Willingness to Pay (WTP). About 93% of the respondent farmers were the member of cooperatives which was the major source of information flow for livestock insurance scheme to them. The result revealed that number of cattle reared, awareness about livestock insurance scheme, and experience of livestock loss have significant positive influences in the decision regarding the adoption of livestock insurance. Farmers are willing to pay more than the current premium rate for livestock insurance. Hence, only increasing the subsidy might not be the solution in expanding the livestock insurance adoption rate. Rather, alternative approach like mobilizing institutions (cooperative) in expanding the insurance scheme is required.

Keywords:

• Livestock insurance
• willingness to pay (WTP)
• double bounded dichotomous choice (DBDC)

REVIEWING EDITOR:

• Pedro González-Redondo, Universidad de Sevilla, Spain

SUBJECTS:

• Agriculture; Agricultural Economics; Insurance; Risk Management

Acknowledgements

I would like to express my gratitude towards Dean and Asst. Dean (Agriculture Faculty) and the entire faculty member for providing favourable academic environment and support for the successful completion of the study. With most appreciation, I heartily thank to all the respondents, milk collectors, Insurance Company, insurance agent, cooperative and farmer’s groups of study area, who provided me the required information, co-operated with me and provided great hospitality during the field survey of this research. Without their help, cooperation and information, the research could never be accomplished.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Nepalese Rupees (NPR) 131.90 = 1 US Dollar.

2 UB: Upper Bound.

3 LB: Lower Bound .

4 Nn means “no” response to both the double bounded dichotomous question.

5 Ny means “no” response to 1^st question and “yes” response to follow up question.

6 Yn means “yes” response to 1^st question and “no” response to follow up question.

7 Yy means “yes” response to both 1^st and follow up question of double bounded dichotomous choice questions.