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The willingness to pay for flood insurance in Mekong river delta

By: Nguyen Ngoc Que Anh - VNP 21

Supervisor: Dr. Truong Dang Thuy

In the circumstance of climate change and series of dams built in Mekong River Basin, risk of flood damages and productivity loss in Mekong River Delta tend to be ambiguous and unpredictable. Choice experiment is applied to assess the stated preference and the willingness to pay for flood insurance of local farmers. Based on the data obtained from survey in Mekong River Delta, we consider the impacts of attributes on the utility of insurance buyer and the willingness to pay of them. As a result, flood insurance attributes except deductible have impact on utility of farmers and the willingness to pay for flood insurance of them. Especially, buying the flood insurance provided by corporation will raise the utility and willingness to pay of local farmer. Since the deductible have no impact on the utility of flood insurance buyers, local farmers are willing to share the burden with providers. When the effects of challenges for flood insurance development are controlled, only provider and policy types have strong positive impact on utility of insurance.

Based on the estimate result, WTP for attributes and the WTP for specific insurance package are calculated carefully, we also evaluate the probability of levels of WTP for flood insurance with different levels of important attributes. The potential development of insurance companies are very bright, especially corporation. The profitability will be large, if the provider provide insurance packages with favorite policy. When premium of the most preferred flood insurance vary from 5,000 (VND/1000m^2/ Farming season) to 200,000 (VND/1000m^2/ Farming season), 90 percent to 79 percent of farmer willing to pay it.

Keywords: Willingness to pay, Flood insurance, Mekong River Delta, Random Utility Model