Role of agricultural insurance in risk mitigation for rainfed farming communities

Abstract:

Rainfed farming communities face disproportionately high production risks from erratic monsoons, yet insurance adoption among these farmers remains surprisingly low across South Asia. This research assessed the role of agricultural insurance in mitigating income risk for rainfed crop growers in the Sylhet division of Bangladesh during 2022-2023. A cross-sectional survey of 180 farmers (90 insured, 90 uninsured) was conducted across six upazilas using stratified random sampling. Insured farmers reported 24.6% lower income variability (measured by coefficient of variation of annual crop income over five years) compared to uninsured farmers. Among insured respondents, 62.3% received claim payouts within the surveyed period, but only 41.8% considered the payout amount adequate to cover actual losses. Awareness of insurance products was the strongest predictor of adoption (OR = 3.84, p< 0.001), followed by landholding size and literacy level. Weather-based index insurance showed higher farmer satisfaction (68.4%) than traditional yield-based products (48.2%) due to faster payouts. These findings suggest that expanding weather-indexed products with simplified enrolment procedures can improve insurance uptake and provide meaningful risk protection for rainfed farming households in Bangladesh.