Stated and Realized Demand for Parametric Rainfall Insurance Among Rice Farmers in Vietnam
We study stated and realized demand for a new parametric insurance product against excessive rainfall among rice farmers in Vietnam’s Mekong Delta, a region highly exposed to climate change. Using a household survey of 3,000 rice-farming households, we elicit willingness to pay (WTP) using a multiple-bounded dichotomous choice approach. Stated demand is substantial: 33% of respondents report a WTP of at least half the market price, and 18% report a WTP equal to or higher than the market price. Stated demand is significantly higher among men, younger respondents, and respondents reporting better self-assessed product understanding. Yet when insurance agents offered the product at a subsidized price below respondents’ stated WTP, no respondent purchased it. We discuss mechanisms that may explain this discrepancy between stated and realized demand, including limited incentive compatibility of the WTP elicitation mechanism, changes in valuations, and contextual barriers to insurance adoption.