Understanding shrimp farmer preferences on index-based insurance as a risk mitigation tool in the Mekong Delta

Abstract Shrimp farming in the Mekong Delta faces significant market and climate risks, including disease outbreaks, extreme weather, and water quality fluctuations, leading to financial losses. Index-based insurance offers a potential risk management solution. This study investigates shrimp farmers’ willingness to pay for key insurance attributes using a latent class choice model and survey data from 500 farmers in major aquaculture regions. The analysis identifies two distinct segments. Segment 1 (low-education, training-responsive) favors early payout and seasonal coverage, but resists company-assisted claims, preferring transparent processes like self-assessment or participatory verification. Trust-building through training is key for this group. Segment 2 (higher-education, company-trusting) accepts company involvement and weather-based assessments, with moderate WTP for structured or bundled packages, especially when pricing is transparent and service reliable. Outreach for this group should emphasize provider credibility over training. The results suggest that customized insurance products are more effective than a one-size-fits-all approach. Insurers and policymakers should develop flexible policies tailored to farmers’ risk perceptions and financial capacities.