Research on factors affecting farmers' intention to participate in rice insurance in the Red River Delta

Fishbein (2005) combined their research results in two models including TRA and TPB to produce a synthetic model studying impacts of attitude on behavior. The model core is a series of causal effects that begin with the formation of behavioral beliefs, norms and control. These beliefs are assumptions that affect attitude, subjective norms and perceived behavioral control, thereby create intentions and behaviors. 1.2.7. Related models Nguyen Thi Nguyet Dung and Nguyen Thi Sinh (2019) removed attitude from their model with the explanation that attitude could not be considered as a complete intermediary to assess the impacts of perceived usefulness and perceived ease of use on behavioral intentions. In addition, they added two elements including income and communication into the model. While Hoang Thu Thuy and Bui Hoang Minh Thu (2018) applied the TRA model and the TPB model, adding the elements of communication, perceived risk, participation procedures and moral responsibility. From these two models, it can be seen that the communication and participation procedures have impacts on people’s intention to participate, and this serves as the suggestion related to factors for the research model of the dissertation. Therefore, based on the research overview and theories of buying intentions of customers, the dissertation proposed the factors affecting farmers' intention to participate in rice insurance in the Red River Delta which include attitude, subjective norms, perceived behavioral control, and communication and participation procedures. 9 CHAPTER 2 METHODOLOGY 2.1. Research process On the basis of the research model, the dissertation established a research process consisting of six stages Stage 1: Determine research objectives Stage 2: Research the theoretical basis and previous studies. Stage 3: Qualitative research and investigation of insurance companies and farming households Stage 4: Quantitative research Stage 5: Carry out Cronbach Alpha coefficients and exploratory factor analysis to test the value of variables and evaluate the reliability of the official scale. Stage 6: Use multivariate regression to test research models and hypotheses 2.2. Research design 2.2.1. Qualitative research Qualitative research was carried out using in-depth interviews with experts with the following purpose: - Examine and discover more independent variables affecting intention to participate in rice insurance in the original theoretical model (formed on the basis of literature overview). - Modify the scale, through in-depth interviews, the author aimed to check whether the investigated subject correctly understands the meaning of the scales or not, whether the structure and words of the scale are easy to understand, easy to answer or not. From there, the scale will be modified before quantitative research is conducted. 2.2.2. Quantitative research + In terms of insurance companies, the dissertation sent the survey questionnaire to the non-life insurance enterprises in Vietnam, and the subject of the survey was leaders of these firms. + In terms of farming households: The survey carried out in Thai Binh and Nam Dinh used the simple random sampling. In each province, the author chose three districts, in each district three communes were selected, in each commune the study chose three villages, and in each village, 10 households were selected. Therefore, the sample size was 540 households, which met the research conditions by Hair et al. (1998) and Tabachnick & Fidell (1991). The tool used to run the model was SPSS 21.0 software 10 2.3. Data and research methods 2.3.1. Research data Secondary data Descriptive statistics including comparison, classification, graph... was used to analyze this type of data. Primary data + Data of farming households: the study surveyed 540 farming households in Thai Binh and Nam Dinh. + Data of insurance companies: The author interviewed and surveyed experts from insurance enterprises. 2.3.2. Research methods Descriptive statistics The dissertation used descriptive statistics to process data, analyze the results, and effectively deploy rice insurance in particular. Cronbach's Alpha The dissertation examined the reliability of the score via Cronbach's Alpha coefficients with criteria: Cronbach's Alpha> = 0.6: Acceptable with new studies; Cronbach's Alpha from 0.7 to 0.8: Usable score; Cronbach's Alpha> 0.8: Good score Exploratory factor analysis (EFA) The study used factor loading as an indicator to ensure practical significance of EFA; KMO index demonstrated the suitability of EFA; Eigenvalue value represented the variation explained by one factor compared to the variation of all factors. Analysis of variance (ANOVA) ANOVA was used to discover whether different attributes affect differently the intention to participate in rice insurance? Regression analysis The dissertation used the Binary Logistics regression model with the following equation: Y= βo + β1X1 + β2X2 + β3X3 + β4X4 + β5 X5 + β6X6 In which: + The variable Y1 is the dependent variable representing farmers' intention to participate in rice insurance in the Red River Delta. + X1, X2, X3, X4, X5, X6 are independent variables representing factors affecting the intention to participate in rice insurance. + βo, β1, β3, β4, β5, β6, are the coefficients of the regression model. 2.4. Establishment of models and scales 2.4.1. Establishment of research model 11 The study used the TPB model to conduct the research, the survey process was carried out through two stages. In stage 1, the author sent the questionnaire to the non-life insurance companies in Vietnam and concurrently conducted in-depth interviews with 15 experts. The purpose was to review the scales and determine that in addition to the three factors in the TPB model, whether it is possible to include new factors including communication on rice insurance, participation procedures, the Government's assistance policies in the model. In stage2, after identifying the possible factors, the research built the questionnaire, investigated households to verify the impacts of these factors on their intention to participate in rice insurance. The results of stage 1 showed that the independent variables that the dissertation planned to include in the model can have influence on dependent variables. Consequently the author proposed the research model with six independent variables and 1adependent variable as follows: 2.4.2. Establishment of research scale To measure the variables, based on previous studies and survey results of insurers as well as interviews with experts, the study established scales. The scale used by the author was the Likert scale with five levels of popularity from Totally disagree to Totally agree. 2.4.3. Research hypotheses There were six hypotheses given corresponding to these six following factors: Attitude towards rice insurance Intention to participate in rice insurance Subjective norms Perceived behavioral control in participation in rice insurance Communication on rice insurance Participation procedures for rice insurance The Government's fee assistance policies H1 H2 H3 H4 H5 H6 12 H1: Attitude towards the participation in rice insurance has a positive correlation with the intention to participate in rice insurance H2: Subjective norms have a positive correlation with intention to participate in rice insurance H3: Perceived behavioral control has a positive correlation with the intention to participate in rice insurance H4: Communication on rice insurance has a positive correlation with the intention to participate in rice insurance H5: Participation procedures for rice insurance have a positive correlation with the intention to participate in rice insurance H6: Insurance premium assistance policies have a positive correlation on the intention to participate in rice insurance CHAPTER 3 SCIENTIFIC BASIS OF RICE INSURANCE AND FACTORS AFFECTING FARMERS' INTENTION TO PARTICIPATE IN RICE INSURANCE 3.1. Objective necessity and the role of rice insurance 3.1.1. Objective necessity 3.1.2. The role of rice insurance 3.2. Rice insurance 3.2.1. Insurance form 3.2.1.1. Based on the scope of insurance, it is possible to deploy rice insurance in two forms which are finite risk insurance and comprehensive insurance. a. Finite risk insurance b. Comprehensive insurance 3.2.1.2. According to insurance methods, there are two types of insurance which traditional insurance and index insurance. a. Traditional insurance b. Rice insurance according to the index 3.2.2. Subject and scope of insurance The insured subject of rice insurance is the yield harvested at the end of the season. The insurance period is usually from the time of planting to the time the product is harvested. 3.2.3. Insurable value and Sum Insured 13 Regarding rice, farmers buy insurance before each season, therefore insurable value and sum insured are determined based on the average actual harvested output in the past few years and the average price per unit of production in those years. 3.2.4. Risk control, loss prevention and reduction a. Risk control b. Loss prevention and reduction 3.2.5. Inspection and compensation Inspection is carried out to examine the causes and the extent of the loss. And when compensating, the insurer must pay attention to the compensation rate, the exemption level, the salvage value... 3.2.6. Prevention of rice insurance profiteering In order to prevent profiteering in rice insurance, insurance terms and rules are requires to be strictly constructed. In addition, the communication should be strengthened, so that farmers can see the long-term effects of insurance profiteering. 3.2.7. Reinsurance in rice insurance The arrangement of reinsurance is mandatory. The purpose of rice reinsurance arrangement is to protect the insurance company, and at the same time ensure benefits for farmers. 3.3. Farmers' intention to participate in rice insurance 3.3.1. Consumer behavior According to the American Marketing Association, consumer behavior is the interaction between environmental stimuli and human perception and behavior through which people change their lives. According to Phillip Kotker and Levy (2001), customer behavior is specific behaviors of individuals when deciding to purchase, use or dispose products or services. Thus, customer behavior is the customers' whole process from the moment they have a demand for certain goods or services until they choose to buy and use these goods and services. 3.3.2. Customers' intention and decisions The stages in the buying process were introduced by Engel et al. (1968). Stage 1: Acknowledgement of demand Stage 2: Research for information Stage 3: Evaluation of options Stage 4: Decision-making: Normally consumers decide to buy products according to their intentions, but there are two factors that can influence them including others' attitudes and unexpected factors of the situation. Stage 5: Post-purchase behavior 3.4. Factors affecting farmers' intention to participate in rice insurance 14 3.4.1. Attitude Attitude is a behavior that is defined as a "judgment of an individual about the results obtained from the performance of an act" (Ajzen, 1991), or "a person's general opinions about the disapproval of certain behaviors (Ajzen & Fishbein, 1980). 3.4.2. Subjective norms Subjective norms are described as "one's perception of whether most of the individuals that are important to this individual think that person should or should not perform a certain behavior" (Ajzen & Fishbein, 1980) or is "the individual's perception of social pressures to perform or not perform a behavior" (Ajzen, 1991). 3.4.3. Perceived behavioral control Perceived behavioral control is defined as "the individual's perception of how easy or difficult it is to perform a behavior" (Ajzen, 1991). Perceived behavioral control presents how easy or difficult an individual feels about the ability to perform a behavior. 3.4.3. Communication Communication is understood as the process of exchanging information, interacting with each other between two or more people, enhancing mutual understanding, and changing perceptions. 3.4.5. Participation procedures The participation procedures demonstrate the process of accessing and finding out relevant information of customers for the enterprise and its products. 3.4.6. The Government’s fee assistance policies The Government’s insurance premium assistance policies are the sponsorship of either part or the participants’ entire insurance premium. The policy helps farmers reduce their financial burden when participating in insurance, and concurrently encourage them to have more confidence in the policy. 3.3. Agricultural insurance in some countries and lessons for Vietnam 3.3.1. Agricultural insurance in some countries 3.3.1.1. In Spain In Spain, there are three programs which are multi-risk damage insurance, productivity insurance based on geography, Productivity Insurance based private farms. Premium subsidies are a key element in Span's policy. The rate of subsidy for insurance premiums has varied significantly from 0.47% in 1998 to 0.58% in 2008 and the Government is the last reinsurance sponsor for insurance companies. 3.3.1.2. In the US The US government established the Federal Crop Insurance Corporation (FCIC) which is a 100% state-owned enterprise and is now regulated by the risk management agency (RMA). The United States is a country with a variety of insurance plans. Multi-Peril 15 Crop Insurance has three programs including Catastrophe insurance (CAT), Buy-up Coverage; Group insurance (GRP). Revenue Insurance consists of three programs which are Income Protection, Crop Revenue Coverage (CRC), Revenue assurance (RA). The US government provides assistance in many ways such as providing insurance benefits, basic natural disaster yield insurance coverage for the entire crop area, compensation assistance, administrative cost support for public Insurance companies and the Government's acceptance of reinsurance. 3.3.1.3. In India India implements Compulsory Agricultural Insurance for borrowers. Currently there are these insurance plans as follows: Comprehensive Crop Insurance Scheme (CCIS); National Agricultural Insurance Scheme (NAIS); Weather Based Crop Insurance Scheme (WBCIS) National Crop Insurance Programme (NCIP). Small and medium-sized farming households receive a 50% premium subsidy from the government and state government (co- financing). Losses being more than 150% of the premium insurance will be compensated by the Agricultural Relief Fund co-indemnified by the central government and state governments at a 1: 1 ratio. Besides, the Government also supports the management costs of the program. 3.3.1.4. In China The China Insurance Regulatory Commission forms four insurance companies specializing in agricultural insurance. Local authorities in some provinces work closely with PICC and CUPIC to develop and pilot a wide range of agricultural products and new programs. The Chinese government subsidizes about 35% of the insurance premium for farmers, the provincial government subsidizes 25%, and the district government subsidizes no less than 10% of the insurance premium for the farmers. Thus, farmers only have to pay about 10-30% of the insurance premium. 3.3.1.5. In Japan Japan is a typical country in building the National Mutual Insurance Federation of Agricultural Cooperatives in three levels: national, provincial and village level. Japanese Agricultural Insurance relies on the cooperation of local farmers to establish a common reserve fund by accumulating insurance premiums to minimize farmers' losses in case of natural disasters. The Japanese government sponsors about 50% of the premium and is the ultimate reinsurer. 3.3.2. Lessons for Vietnam Firstly, rice insurance is designed as a commercial product that develops based on the law of supply and demand. Secondly, the State often sponsors agricultural insurance, especially in the early stage of implementation. Thirdly, the State combines state insurance and other financial instruments and the State is the ultimate reinsurer for insurance 16 enterprises. Fourthly, it is essential to ensure the rule of majority in agricultural insurance. Fifthly, most countries have conducted insurance nationwide, and concurrently provided a number of mandatory groups to participate in insurance to limit adverse selection. Sixthly, the State often creates a "push" for the agricultural insurance market. Seventhly, product design is simple, easy to understand, suitable with the needs and capabilities of farmers, and it is necessary to combine traditional insurance with index insurance; in the long term, index insurance should be focused on more. Eighthly, the Government should select an appropriate model for agricultural insurance implementation. CHAPTER 4 ANALYSIS OF FACTORS AFFECTING FARMERS' INTENTION TO PARTICIPATE IN RICE INSURANCE IN THE RED RIVER DELTA 4.1. Natural and socio-economic conditions in the Red River Delta and the development of rice production 4.1.1. Natural conditions 4.1.2. Socio-economic conditions 4.2. The current situation of rice insurance in the Red River Delta 4.2.1. Before 2011 In 1982, the Government started implementing a pilot rice insurance program in Vu Ban and Nam Ninh districts (formerly Ha Nam Ninh province). The insurance company were assigned to implement rice insurance at that time was Bao Viet. The pilot period was from 1982 to the end of 1983. In 1984, due to changes of the production method from the cooperative model to the household economic production model and a good harvest, most of farming households did not join rice crop insurance. Therefore, since 1984, Bao Viet stopped the implementation. By 1993, Bao Viet re-deployed the rice insurance in 12 provinces. Although these provinces are typical rice growing provinces, the covered areas accounted for only a small portion of the total cultivated area of the province. Subsequent results showed that the main beneficiaries of insurance were farmers from the area being the most at-risk of damage, this contradictory situation caused many serious difficulties for Bao Viet (FAO, 1999). However, the results achieved were not really meaningful, because the insured area only accounted for a very small part, therefore after two years the program was forced to stop because of huge losses. 4.2.2. During 2011 - 2013 4.2.2.1. The basis for the implementation of rice insurance in the Red River Delta during 2011- 2013 17 On March 1, 2011, the Prime Minister issued Decision 315/QD-TTg on pilot implementation of agricultural insurance in 21 provinces and cities during 2011-2013; of which seven provinces were piloting rice insurance. The Government also stipulated two insurance companies to carry out the pilot implementation, Bao Viet and Bao Minh. Concurrently, the Government also regulated the insurance premium assistance policy according to the classification of farming households. Since the promulgation of Decision 315/2011/QD-TTg, the Government and related ministries have continuously issued a series of documents to guide the implementation. 4.2.2.2. Evaluation of the current situation of rice insurance participation As Decision 315/2011/QD-TTg was applied from July 1, 2011, then the spring crop and the season were over, therefore in 2011 there was no rice insurance in the Red River Delta. By 2012 and 2013, the number of insured households and the insured rice area increased in the three years of this pilot. Although the rice cultivated area in 2013 decreased compared to 2012, the rate of insurance participation was higher due to the increase in the insured area . In the three-year pilot, the structure of poor households participating in agricultural insurance in these two provinces still accounted for the majority: 96.74% in 2012 and 94.84% in 2013 in Thai Binh; 95% in 2012 and 94.3% in 2013 in Nam Dinh. In 2012, after the storm No. 8, Bao Viet paid more than 2,690 billion VND to households in Tien Hai district, Thai Thuy. 4.2.3. During 2014 - 2019 Since Decision 315/2011 / QD-TTg expired in 2013, the basis for the implementation of rice insurance by Bao Viet and Bao Minh was no longer the same as before, therefore farmers' motivation to participate in rice insurance also disappeared. On April 18, 2018, the Government issued Decree 58/2018/ND-CP on agricultural insurance. This Decree provided policies to support agricultural insurance through the support related to agricultural insurance premium for several insured agricultural production organizations and individuals in some certain areas. On June 26, 2019, the Prime Minister issued Decision No. 22/2019/QD-TTg on the implementation of policies to support agricultural insurance including rice as the subject. Fundamentally, the subsidy rate for rice insurance premiums according to Decision No. 22/2019/QD-TTg was lower than that in the period of 2011 - 2013. Since Decision 315/2011 / QD-TTg expired until two new documents took effect, rice insurance has not been deployed. 4.2.4. Shortcomings and causes Although the Government has issued many incentive policies, the results of pilot agricultural insurance still have some limitations such as: The insurance coverage area was not large, the number of farming households participating in agricultural insurance was 18 small, and most of them are poor farming households. Insurance businesses are still not really interested in the implementation of rice insurance. Causes of the shortcomings 1) In terms of farmers: Firstly, farmers' awareness of risk management and insurance was low. Secondly, their financial capacity to participate in insurance was limited. Thirdly, the scale of rice production was small and fragmented. Fourthly, rice production was mainly based on experience. Fifthly, the mindset of relying on financial support mechanism from the State was still popular. 2) In terms of insurance companies: Firstly, insurance companies shared a common perception that rice has high risks, the frequency of risks was quite high, and the identification of nature and causes of risks was difficult. Secondly, profits obtained from rice insurance were low. Thirdly, insurers faced many difficulties in risk management. Fourthly, the extent of damage tended to exceed the financial capacity of insurance enterprises. Fifthly, insurers have not invested properly in human resources to implement agricultural insurance. Sixthly, insurers were also unable to actively control the farming process. 3) In terms of the State: Firstly, the Government has been focusing on supporting poor households. Secondly, the period time for the pilot implementation was too short, and the scale was too large. Thirdly, the State has not provided adequate support for communication. Fourthly, the Government has not provided funding for implementation in local areas. Fifthly, the State has not focused on investigation, research and forecasts and this led to a lack of databases to calculate premium and build insurance index. Sixthly, there is a lack of a mechanism for close and regular cooperation between insurance enterprises and local authorities and relevant sectors in the implementation of agricultural insurance. Seventhly, the Government did not actively participate in the rice insurance. 4.3. Analysis of factors affecting farmers' intention to participate in rice insurance in the Red River Delta 4.3.1. Descriptive statistics of research samples The dissertation surveyed 540 households in Nam Dinh, Thai Binh. 426 of them were collected, 28 were invalid and 398 were eligible for analysis. Specifically, there were 188 households in Nam Dinh province accounting for 47.2% and 210 households in Thai Binh province accounting for 52.8% of the survey sample. There were 351 males accounting for 88.2%, and 47 women accounting for 11.8%. The age of household owners ranged from 26 to 67 years old, of which most of household owners were from 40 to 50 years old. Most of the households had monthly income from 5 to below 10 million dong. There were 285 households who have participated in rice insurance, and only 113 households have n