Willingness to pay for tomato insurance: the case study of Moamba district, Mozambique

Abstract

Agriculture is a risk activity because it depends heavily on biophysical conditions. This calls for existence of agricultural insurance. However, in Mozambique agricultural insurance is not well disseminated and used as mechanism to reduce risk during agricultural production. The implementation of agricultural insurance calls for the application of appropriate premium rate. However, it is not yet been estimated in Mozambique. Additionally, the estimation of premium rate is not unique mechanism towards introduction of crop insurance as it is necessary to know if producers are willing to pay for agricultural insurance. Therefore, this study estimates premium rate and farmers willingness to pay for tomato insurance in Moamba. Additionally, the study explores factors affecting farmers’ willingness to adopt tomato crop insurance. Probit and bivariate probit models were used to analyze the objectives of the study. The results show that the premium rates range between 1.25 ton/h and 2.25 ton/ha per year. The results also indicate that female farmers and producers who have off-farm income are more likely to purchase tomato insurance while an increase in age of farmer reduces the probability of purchasing tomato insurance. Finally, the results indicate that farmers are more willing to purchase flood insurance and the willingness to pay for crop insurance is 1.49/ha/years which is 10% of their average tomato yield