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Demand for weather index insurance: evidence from Indian cotton farmers

Reddyprasanna Diyyala,Q. Wang,S. Mushtaq,N. V. Venkatesa Palanichamy,D. Murugananthi,V. Geethalakshmi,M. Rajavel

Published 2026 in Journal of Agribusiness in Developing and Emerging Economies

ABSTRACT

Adverse climatic conditions have significantly impacted agricultural production in India. To manage climate risk, weather index insurance (WII) is emerging as a useful tool to transfer risk. However, despite the potential advantages, the adoption of weather-based insurance remains low. Thus, this study aims to examine the factors influencing farmers’ willingness to pay (WTP) for WII. A cross-sectional survey was conducted among 350 cotton farmers in the Virudhunagar district, selected through a multistage sampling approach, incorporating simple random sampling. Data were collected through personal interviews using a pre-tested questionnaire. The logit model is used to analyse how socioeconomic variables, risk aversion (determined using the multiple price list experiment) and risk perception (analysed using a risk matrix) affect weather insurance adoption. Results show that 65% of the surveyed households are willing to participate in WII. Risk aversion and risk perception are positively and significantly associated with insurance uptake. Education, annual income, access to credit and weather-related yield loss also have a significant positive correlation with WTP. However, gender, family size, and access to irrigation are negatively associated with WTP. Future studies could be enhanced by including more diverse farm areas and considering other influential factors. These findings can assist insurance companies and policymakers in understanding farmers’ risk behaviour and promoting the adoption of WII to improve farmers’ climate resilience.

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