THE WILLINGNESS OF FARMERS TO PAY INSURANCE PREMIUMS FOR SUSTAINABLE RICE FARMING IN BALI

ABSTRACT One of systemic and institutional effort for mitigating risk of crop harvest failure is rice farm insurance (RFI) which has been implemented in Bali since 2015. The RFI premiums and the coverage value for one hectare insured paddy field in one planting season were IDR180,000 and IDR6,000,000, respectively. The study aims to estimate the farmer willingness to pay (WTP) for the RFI premiums and analyze the interaction between socio-economic characteristics of farmers and their decision to join in the RFI program. The socio-economic characteristics and farmer WTP data were collected by Contingent Valuation Method (CVM) survey to 270 representative participants of the RFI program in nine regencies or city in Bali Province during 11 to 18 September 2018 by involving nine enumerators. This survey used closed-ended dichotomous choice format questionnaire. The WTP was estimated by using software of STATA 11.0 version while decision analysis was by using Chi-squared Automatic Interaction Detector (CHAID) method. Based on the estimation results, the farmer WTP is IDR61,281.57 (34.05%) of RFI premiums per hectare in one planting season. The farmers’ socio-economic characteristics especially cropping pattern, land tenure status, gender, and rice productivity affect to their participation in the RFI program. Based on the analysis, the RFI premiums as much as IDR60,000 per hectare could be charged to insured while governments’ subsidy could be reduced to be IDR120,000 per hectare in one planting season. Key words: agricultural insurance, CVM, rice farm, subsidy, WTP