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Research article - Peer-reviewed, 2023

Revisiting preferences for agricultural insurance policies: Insights from cashew crop insurance development in Ghana

Mensah, Nicholas Oppong; Owusu-Sekyere, Enoch; Adjei, Cosmos


The development and uptake of agricultural insurance products by farmers in developing countries has been universally and disappointingly low. This paper investigates farmers' preferences and willingness to pay for a variety of agricultural insurance products, including indemnity insurance, index insurance, benchmark insurance, and hybrid (indemnity-index) insurance in the Bono and Bono East Regions of Ghana. We employed hybrid latent class and multiple indicators, multiple causes (MIMIC) models using discrete choice experimental data from 383 cashew growers. The results show that cashew farmers are heterogeneous in their preferences, with a majority advocating for agricultural insurance against key perils such as wildfires, high wind speed and excess rainfall. Hybrid (indemnity-index) insurance product is highly preferred and valued by cashew farmers advocating for agricultural insurance, followed by index insurance product. Farmers are quite sensitive to premiums, expected payout, type of perils covered by the insurance and loss assessment criteria. Social and behavioural constructs relating to trust in insurance companies, subjective knowledge about agricultural insurance, and perceived agricultural insurance benefits are significant determinants of farmers' preferences for agricultural insurance products. The findings imply that it has become very necessary for agricultural insurance product developers, underwriters, and insurers in developing countries to gain more insight on farmers' social and behavioural constructs related to agricultural risk, insurance knowledge and trust. We suggest that agricultural insurance product developers and policy-makers involved in agricultural insurance development should improve farmers' understanding of basis risk and the concept of agricultural insurance, as well as the potential benefits of farm insurance. In this way, we can improve the uptake of agricultural insurance products by farmers in developing countries.


Agricultural insurance; Choice experiment; Ghana; Latent variable; Risk

Published in

Food Policy
2023, Volume: 118, article number: 102496

    UKÄ Subject classification

    Agricultural Science

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