Farmers’ Willingness to Pay for Agricultural Insurance in Kulon Progo

¹ Agribusiness Study Program, Faculty of Agriculture, Universitas Pembangunan Nasional Veteran Yogyakarta, Yogyakarta, Indonesia
² Soil Science Study Program, Faculty of Agriculture, Universitas Pembangunan Nasional Veteran Yogyakarta, Yogyakarta, Indonesia

^* Corresponding author: dhika.cahyasita@upnyk.ac.id

Abstract

This study explores farmers’ willingness to pay (WTP) for agricultural insurance in Kulon Progo, Indonesia, and examines how their perceptions of agricultural insurance influence this willingness. With rice farming exposed to various risks such as pests, diseases, and climate change, the Indonesian government launched the Rice Farming Insurance program, subsidizing 80% of the premium. Despite the subsidy, the program has not achieved its full potential. The study aimed to determine farmers’ WTP for insurance and investigate the relationship between their perceptions and WTP. A survey was conducted with 49 rice farmers, and the contingent valuation method (CVM) was used to estimate WTP through bidding techniques. Statistical analysis, including correlation tests, was employed to examine the connection between farmers’ perceptions of agricultural insurance and their WTP. The results show a positive correlation between the two variables, indicating that farmers are more likely to pay for insurance if they perceive it as reliable and effective. However, the study reveals that most farmers are only willing to pay IDR 36,000 per hectare per planting season. This finding suggests that while government subsidies are essential, additional measures may be needed to enhance the program’s effectiveness and address climate-related risks more comprehensively.