Willingness to pay for agricultural flood insurance in the Mekong River Delta

Abstract

Increasing urbanization and industrial development upstream of the Mekong River Delta of Vietnam (MRD) including the construction of a series of dams for hydroelectricity generation is changing the downstream risk of flooding. Concerns about the likely influence of global climate change and rising sea levels add further uncertainty to this risk that threatens the livelihood of farmers. With this in mind and in view of the under-developed state of the market for crop insurance in the MRD, we survey rice growers to explore their willingness-to-pay (WTP) for crop insurance by using a choice experiment. The experimental design comprised five attributes, including the type of peril covered – riverine flooding (flooding); flooding triggered by tidal regimes (inundation); or flooding, inundation and wind damage – type of provider; extent of cover and deductible and premium. Two hundred and twenty-six rice-growing farmers were surveyed with each farmer responding to six different choices. Our study shows that WTPs for an insurance plan covering a loss up to 2 million VND/1000m2/farming season and having a deductible of 25% of the potential (profit) crop value varied between 200,000 and 500,000 VND/1000m2 (1USD = 22,550 Vietnamese Dong – VND) for each rice growing season, implying a potential market for crop insurance.