Abstract:
The objective of this study is to examine famers‟ willingness to pay for an index based
microinsurance scheme (IBMS) for paddy crops to protect against production loss caused by
natural disasters in Sri Lanka and to assess product preferences for this IBMS. The contingent
valuation method (CV) was used to elicit the willingness to pay for the hypothetical IBMS. For
product preferences, a conjoint analysis was conducted to study their relative importance and to
discover the relationships between different attributes and the characteristics of the respondents.
The results show that the interest in joining IBMS is 88% (SD=2.4%) overall. When willingness
to pay is assessed, it is found that most potential purchasers would prefer a higher level than that
offered by the existing conventional insurance plan. The results of the preference analyses
demonstrate that for IBMS products can be adapted for specific locations in order to maintain
demand. These findings provide strong support for launching IBMS in Sri Lanka.