Adoption of Agricultural Insurance Against Drought: Perception Analysis and Tunisian Farmers’ Willingness to Pay

In recent years, the agricultural sector has been increasingly threatened by the negative impacts of climate change, which are manifested by climatic hazards affecting resources, crops, and farmers’ incomes. This is why there is a growing awareness of the need to develop strategies and measures to adapt to these phenomena among the majority of actors and political decision-makers. Agricultural insurance against drought is one of the adapting measures to mitigate the negative effects on farms and to reduce farmers’ vulnerability. In this perspective, this paper aims to analyze the perception of Tunisian farmers on agricultural insurance and to assess their willingness to pay (WTP) to insure against the risk of drought and its negative effects. The modeling of farmers’ decision to adopt insurance and their WTP using two logistic models (binary and then ordinal logistic regression) represents the main methodology framework used here. Field survey with farmers from Siliana region was used to collect data. Most farmers were aware of the importance of agricultural drought insurance. However, they asked for an improvement of the current form. Similarly, the farmer's WTP was primarily dependent on the service offered by the insurance company, in particular the level of reimbursement for damage. The results obtained from the econometric analysis showed the complexity of the farmers’ decisions. Hence, the decisions were determined by several factors, including those related to the farmer and his farm. However, external, institutional, and political factors determine the decision of farmers to adopt insurance and the WTP for insurance costs.