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The willingness to offer livestock insurance in rural China: a discrete choice experiment among Chinese insurance agents

Youwei Yang (Applied Economics and Management, Charles H Dyson School of Applied Economics and Management, Cornell University, Ithaca, New York, USA)
Wenjun Long (Research Center for Rural Economy in Ministry of Agriculture and Rural Affairs, Beijing, Peoples Republic of China)
Calum G. Turvey (Applied Economics and Management, Charles H Dyson School of Applied Economics and Management, Cornell University, Ithaca, New York, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 31 January 2022

Issue publication date: 3 October 2022

270

Abstract

Purpose

This paper investigates Chinese agricultural insurance agents willingness to offer (WTO) livestock insurance based on the variations of eight main attributes of livestock insurance.

Design/methodology/approach

This study implements discrete choice experiments (DCE) with actual insurance agents who design, sell and operate livestock insurance in China. The choice experiment of this study is based on the D-optimal approach, a six-block design, with 15 cards per block and two choices per card. The sample size was 211. Econometrics results are based on conditional and mixed logit models.

Findings

The authors find that the subsidy effect is enormous; a one level increase of subsidy leads to 3.166 times higher probability to offer. This subsidy effect is important as it confirms the endogenous structure between price and quantity in insurance offering, where subsidy does not only incentivize demand but also the supply. Another main factor of insurance investigated is the impact of different coverage types on agents' WTO. The authors find that agents prefer mortality insurance the most, followed by revenue insurance and profit insurance, while Index-Based Livestock Insurance (IBLI) is the least preferred to offer. Agents' knowledge about these newer types of insurance supports their WTO as well; thus, proper education is necessary to promote the more advanced types of livestock insurance.

Research limitations/implications

A limitation is that in the presence of COVID 19, and administrative issues at the local level, the sample was not randomly drawn. Nonetheless, the authors believe that there is enough diversity across participants, insurers and provinces and have done sufficient robustness checks to support results and conclusions.

Practical implications

This study provides further validation for the DCE research method that could potentially be applied to different analyses: using choice experiments to study insurers and reveal their preferences, through combinations of various levels of core attributes for insurance products. The findings and contribution are critical to the reform and improvement of livestock insurance in China and for insurance markets more broadly. The authors find that insurers do not place equal weights or values on insurance product attributes and do not view types of insurance equally. In other words, while farmers may hold different preferences about the type of insurance they demand, the results suggest that insurers also hold preferences in the type of insurance they sell.

Originality/value

So far as the authors are aware, this is the first DCE designed around the supply of insurance products with the subjects being insurance agents, marketers and executives.

Keywords

Acknowledgements

Funding for this research was provided in part by the Myers endowment funds, Cornell University.

Citation

Yang, Y., Long, W. and Turvey, C.G. (2022), "The willingness to offer livestock insurance in rural China: a discrete choice experiment among Chinese insurance agents", Agricultural Finance Review, Vol. 82 No. 5, pp. 914-941. https://doi.org/10.1108/AFR-09-2021-0121

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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