Analysis Of Farmers' Willingness To Pay For Paddy Farming Business Insurance (AUTP) Program In Padang City

Melani, Zaskhia (2025) Analysis Of Farmers' Willingness To Pay For Paddy Farming Business Insurance (AUTP) Program In Padang City. S1 thesis, Universitas Andalas.

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Abstract

The Paddy Farming Business Insurance (AUTP) initiative in Indonesia aims to mitigate risks for rice farmers caused by natural disasters and pests. In 2023, rice production in Padang City fell by 17,475 tons, highlighting vulnerability to climate change. Only 40.7% of the AUTP uptake met its 2021 target, largely due to farmers' reluctance to pay premiums and lack of awareness. Despite significant government subsidies covering 80% of premiums, the participation rate in Padang City, a main rice-producing city among cities in West Sumatra remains low. This research aims to 1) describthe farmers' perception towards Paddy Farming Business Insurance (AUTP) program; 2) analyze the estimated willingness to pay of farmers for Paddy Farming Business Insurance (AUTP) premiums; and 3) analyze the factors that influence the farmers’ willingness to pay the premium of Paddy Farming Business Insurance (AUTP). The research used a sampling method using CVM (Contingent Valuation Method) and the Logistic Regression Model approach. 100 respondents were interviewed, including 50 who had been AUTP participants and 50 who were not AUTP participants.The result shows that farmers'perception of the Paddy Farming Business Insurance (AUTP) program in Padang City has an average score of 2.75, meaning that farmers are at the level of poor category. The average willingness to pay (WTP) for the Paddy Farming Business Insurance (AUTP) program among 77 respondents is IDR 22,320/Ha/MT, which is 12.4% of the total premium. This amount is lower than the government-subsidized IDR 36,000/Ha/MT premium after an 80% subsidy. Thus, if the government adjusts its premium assistance policies, farmers can pay up to IDR 22,320/Ha/MT, and the AUTP program can continue with ongoing subsidy support. Factors that significantly affected farmers' Willingness to Pay (WTP) for the Paddy Farming Business Insurance (AUTP) program are farmer’s age and gender, while the variables of education land area number of family dependents, land status, crop failure, and gender did not have a significant effect on farmers' WTP. The study emphasizes the need for better coordination, policy adjustments, and sustained government support to boost farmer engagement.

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