Determinants of agricultural insurance adoption: evidence from farmers in the state of São Paulo, Brazil

Abstract

Purpose: The purpose of this study is to investigate the determinants of agricultural insurance adoption by farmers of the state of São Paulo, Brazil. Design/methodology/approach: Primary data from the 2015/2016 crop season was collected from a sample of 175 farmers. Logit econometric models were applied to identify the variables that affect the probability of agricultural insurance adoption. Findings: The empirical results show that the education level, access to technical assistance, use of management tools and farm size positively affect the probability of adopting agricultural insurance. In addition, farmers who produce soybean and/or corn are more likely to use insurance. On the other hand, the higher the farmers’ propensity to take risk the lower the likelihood of using insurance. Research limitations/implications: The empirical analysis is based on cross-sectional data of a sample of 175 farmers of the state of São Paulo. The use of panel data with a larger sample of farmers, considering a period of years, could provide additional information. Originality/value: To the best of the knowledge, this is the first empirical analysis about determinants of agricultural insurance adoption by Brazilian farmers, considering behavioral factors. The findings provide useful insights for policymakers in formulating risk management programs in the Brazilian agricultural markets. A better understanding about the determinants of insurance adoption is also relevant for private companies that sell insurance to farmers. Therefore, the paper may contribute with the diffusion of rural insurance as risk management tool in Brazilian agriculture.