Abstract
By employing structured interviews with 234 farmer groups, this study provides explanations for the low and decreasing demand among rice farmers for crop insurance in Indonesia, even though it is offered at a substantially subsidized premium. While it does not find price, income, or land ownership to be significant factors, this study points to the importance of non-price factors, such as subjective probability of loss among farmers, as well as ambiguity and trust. The findings provide insights into policy recommendations, including reassessment of an appropriate scale of loss eligible for the coverage and its corresponding premium, as well as understandability and transparency of the claim procedure and damage assessment. This study also examines the impact of public provision of information on farmers' decisions to purchase and renew the insurance. Furthermore, it indicates the importance of designing insurance as part of a broader risk management.
