Willingess to pay for white leg shrimp insurance

MINISTRY OF EDUCATION AND TRAINING NHA TRANG UNVERSITY VU DUY THANG WILLINGESS TO PAY FOR WHITE LEG SHRIMP INSURANCE: THE CASE OF SHRIMP FARMERS IN TRA VINH PROVINCE MASTER THESIS KH

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNIVERSITY

VU DUY THANG

WILLINGESS TO PAY FOR WHITE LEG SHRIMP INSURANCE: THE

CASE OF SHRIMP FARMERS IN TRA VINH PROVINCE

MASTER THESIS

KHÁNH HÒA – 2019

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNVERSITY

VU DUY THANG WILLINGESS TO PAY FOR WHITE LEG SHRIMP INSURANCE: THE

CASE OF SHRIMP FARMERS IN TRA VINH PROVINCE

MASTER THESIS

KHANH HOA, 2019

Management and Climate Change

Decision on establishing the

Commitee:

Defense date:

Suppervisors:

Professor CURTIS JOLLY

Assoc.Prof NGUYEN THI KIM ANH

Chairman of Committee:

Faculty of Graduate Studies:

DECLARATION

I hereby declare that this thesis titled “Willingess to pay for white leg shrimp

insurance: The case of shrimp farmers in Tra Vinh Province” is my own research It

is original and no part of this work has been submitted for any other degrees or diploma

Nha Trang, 01thNovember 2019

Author

Vu Duy Thang

ACKNOWLEDGEMENT

I would like to express my sincere gratitude to NOHERD project for giving me a chance to study in an international environment with experts and students from many countries around the world

I would like to express my deepest appreciation to the graduate faculty of Nha Trang University for helping and giving me the best conditions to complete my thesis My special thanks go to Prof Nguyen Thi Kim Anh and Prof Curtis Jolly for their continuous support of my study and research, their patience, motivation, enthusiasm, and immense knowledge displayed during the whole process My study could not have been completed without their assistance

I deeply thank the Tra Vinh Department of Agriculture and Rural Development for their offer in collecting data (http://travinh.gov.vn/wps/portal/sonnptnt)

I would like to thank all my Cohort 1 classmates who supported me during this course

of studies

Finally, this thesis is dedicated to my family who have always stood and supported me during my life

TABLE OF CONTENTS

DECLARATION iii

ACKNOWLEDGEMENT iv

TABLE OF CONTENTS v

LIST OF TABLES vii

LIST OF FIGURES AND GRAPHS viii

ABSTRACT ix

!Unexpected End of Formula 1.1 Rationale of the Study 1

1.2 Research Objectives 2

1.2.1 General objective 2

1.2.2 Specific objectives 2

1.3 Research questions 2

1.4 The object and scope of study 3

1.4.1 The object of study 3

1.4.2 The scope of study 3

1.5 Contributions of the study 3

1.5.1 Sciencetific aspect 3

1.5.2 Pratical aspect 3

CHAPTER 2 LITERATURE REVIEW 5

2.1 Agricultural insurance 5

2.1.1 Concept of agricultural insurance 5

2.1.2 Significance of agricultural insurance 5

2.1.3 Types of common risks in agrculture 5

2.2 Agriculture pilot insurance 6

2.2.1 Objects of the aquaculture section of the pilot insurance 6

2.2.2 Scope of the pilot aquaculture insurance 6

2.2.3 Insurance premium 8

2.2.4 Indemnity 9

2.3 Theory of model factors influencing farmers' willingness to pay for whiteleg shrimp insurance 10

2.4 Related domestic and foreign studies 12

2.4.1 Foreign studies 12

2.4.2 Domestic research 13

2.5 Analytical framework of research 15

2.6 Summary of previous research and hypothesis development 16

CHAPTER 3 RESEARCH METHODOLOGY 20

3.1 Research process 20

3.2 Research approach 21

3.2.1 Qualitative method 21

3.2.2 Quantitative method 21

3.3 Sampling method 22

3.4 Types of collected data 22

3.5 Data analytical tools 23

CHAPTER 4 RESULTS AND DISCUSSION 24

4.1 Current situation of aquaculture methods and ecological environment in the research area 24

4.1.1 Current situation of aquaculture farming system 24

4.1.2 Ecological environmental conditions 24

4.1.3 Area and shrimp output over the years 25

4.2 Description of survey sample 26

4.3 Analysis of factors affecting the willingness to pay for whiteleg shrimp insurance 34

CHAPTER 5 CONCLUSION AND RECOMMENDATION 39

5.1 Conclusion 39

5.2 Recommendations 39

REFERENCES 41

LIST OF TABLES

Table 2.1 Premium rate 9

Table 2.2 Formula to calculate the insurance amount 9

Table 2.3 Rate of damage covered for whiteleg shrimp 10

Table 2.4 Summary of variables in previous research models 16

Table 2.5 Variables used in model to analyze the willingness to pay for whiteleg shrimp insurance 17

Table 4.1 Area and shrimp output in Tra Vinh province from 2013 – 2017 25

Table 4.2 Characteristics of shrimp farming households in three districts: Cau Ngang, Duyen Hai, Tra Cu in Tra Vinh province in the survey sample 26

Table 4.3 Whiteleg shrimp farming activities of households in three districts: Cau Ngang, Tra Cu, Duyen Hai in Tra Vinh in 2016 27

Table 4.4 Household’s risks in whiteleg shrimp farming in three districits: Cau Ngang, Tra Cu, Duyen Hai in Tra Vinh in 2016 30

Table 4.5 Frequency of epidemic diseases for whiteleg shrimp in three districts: Cau Ngang, Tra Cu, Duyen Hai in Tra Vinh province for five years (2012-2017) 31

Table 4.6 Awareness of agricultural insurance for shrimp farming 32

Table 4.7 Household’s judgment on total cost, average revenue, damage rate, insurance payment rate calculated on total cost, premium rate calculated on total cost 33

Table 4.8 Results of regression model for “Analysis of factors affecting the willingness to pay whiteleg shrimp insurance” of households in research sample 35

LIST OF FIGURES AND GRAPHS

Figure 2.1 Total willingness to pay 11 Figure 2.2 Analytical framework of research 15 Figure 3.1 Diagram of research process 20

ABSTRACT

The pilot agricultural insurance program was designed to support fammers to overcome and offset financial losses caused by natural disasters and epidemics The pilot program was supposed to contribute to ensuring the stability of rural social security and promoting agricultural production On March 1st, 2011, the Government issued Decision No 315 / QD-TTg on the pilot insurance implementation of agricultural insurance for the period of 2011-2013 The pilot agricultural insurance program was implemented in 20 provinces and cities in Viet Nam with the aim of reducing risks to stabilize farmers' income The Tra Vinh province is one of the places where the pilot agricultural insurance program was tested The pilot program was highly subsidized by the Government of Viet Nam and after three years it was supposed to be handed to the private sector and run under a free market system It is believed that shrimp farmers would be ready to pay for shrimp insurance

The main objective of the research is the evaluation of the willingness to pay for whiteleg shrimp insurance in three districts: Cau Ngang, Duyen Hai, Tra Cu of Tra Vinh province

The research methods used in the study combined qualitative and quantitative methods with data collected from 158 white leg shrimp farming households in the three districts OLS regression model was used to analyze the factors influencing the willingness to pay for white leg shrimp insurance The data was entered in EXCEL and the Eview software was used to analyze the data

The research results show that among seven independent variable included in the regression model, four variables were statistically significant, namely: Age of householder, Number of years of schooling, pond area and the number of dependents belonging to household The other three variables year of operation, agricultural insurance program for shrimp culture, membership of shrimp cooperative/association/or other were not statistically significant Among the four statistically significant variables, two age

of householder and number of years of schooling had positive signs; Number of dependents belonging to household and pond area had negative correlation with the

dependent variable

Keywords: Willingness to pay, agriculture insurance, white leg shrimp

CHAPTER 1 INTRODUCTION 1.1 Rationale of the Study

Vietnam is a country where the economy depends significantly on agriculture with 70% of the population dependent on agriculture for their livehoods The agricultural sector often faces natural disasters and epidemics, with estimated annual losses in Vietnam equivalent to 1.5% of GDP Based on the estimated annual argricultural losses, there is a potential market for agricultural insurance development

In recent years, agricultural insurance has been encouraged by the Vietnam government that has included insurance provision for farmers in the rural agricultural development strategy The content of establishing mechanisms and forms of agricultural insurance was included in the Party Congress Documents (10th and 11thtime), Central Resolution No 7 (10th term) on agriculture, farmers and rural and Decision No 315/QD-TTg of the Prime Minister

Objects and areas were covered by the pilot insurance The Agricultural Pilot Programme in Viet Nam was initiated to support farmers who suffered from physical risks and to minimize the effects of national and government budgetary stress from disaster support payments annually (World Bank, 2005) The program was implemented to assist the poor farmers and to vary the risk responsibility according to farm income and poverty levels The programme was supposed to be tried out from

2011 to 2013, and thereafter the programme was supposed to be roled out nationwide (Nguyen, 2018) The programme provides cover for rice, livestock and aquaculture farming against storms, floods, drought, cold, frost, tsunami and other perils It also provides cover against named pests and diseases and epidemics specific to rice, livestock and aquaculture (Rogers 2013) Paddy production took place in Nam Dinh, Thai Binh, Nghe An, Ha Tinh, Binh Thuan, An Giang and Dong Thap provinces Insurance for buffalos, cows, pigs and poultry was implemented in Bac Ninh, Nghe An, Dong Nai, Vinh Phuc, Hai Phong, Thanh Hoa, Binh Dinh, Binh Duong and Ha Noi Insurance for aquaculture of ”tra” and ”basa” catfish, black tiger shrimp and whiteleg shrimp was implemented in Tra Vinh, Ben Tre, Soc Trang, Bac Lieu, Ca Mau

The pilot implementation of agricultural insurance during this period was essential to create conditions for local people to access insurance on the principle of

voluntariness, ensuring social security and stabilizing capital in production (Nguyen and Jolly, 2018) At the same time, it also created conditions for insurance enterprises

to deploy new business products to diversify insurance activities in the economy However, after three years of the pilot implementation, there are many problems that required solution to find a common voice from famers and insurance enterprises as to whether the insurance program ca be marketed The ability of insurers to breakeven from offering insurance is quite sophisticated due to the boundary between insurance risk and uninsured risk which is difficult to control Also there is a lack of trained professionals with little experience in implementing shrimp insurance operations In addition, statistical data for determing insurance fees are "missing and weak", which significantly affects appropriate fee determinations Lack of specialized agents for independent evaluation of insurance claims remains a problem All these factors infuluence the success of the pilot seafood insurance program in Vietnam

In order to re-implement the voluntary insurance program in general, and in aquaculture, it is necessary to find out farmers willingness to participate in voluntary

insurance and whether they display a “Willingess to pay for white leg shrimp

- Determine the willingness to pay for whiteleg shrimp insurance

- Identify factors that affect the willingness to pay for whiteleg shrimp insurance by shrimp farmers

1.4 The object and scope of study

1.4.1 The object of study

The subject of the study is based on the theory and practice of agricultural insurance and the willingness to pay for insurance for farming of whiteleg shrimp farmers in Tra Vinh province If the premium is less than disaster losses and the amount paid is greater than the damages suddered then farmers will be willing to participate and pay the insurance premium

The object is whiteleg shrimp farmers in Tra Vinh province

1.4.2 The scope of study

- Locations: The study is conducted in three districts including Cau Ngang, Duyen Hai, Tra Cu in Tra Vinh province where there is a pilot program of involunteering insurance for whiteleg shrimp

- Study duration: Primary data was collected in 2016

1.5 Contributions of the study

1.5.1 Sciencetific aspect

Systematizing basic reasoning about willingness to pay and the determination

of the factors that affect the willingness to pay for insurance for whiteleg shrimp farming by farmers

1.5.2 Pratical aspect

- The results of the study are the initial basis for insurance enterprises to determine willingness to pay The main factors affecting the willingness to pay for shrimp insurance by farmers, as well help local authorities to find appropriate solutions to reduce risks and damages on farming whiteleg shrimp in Tra Vinh province

- The research provides scientific information to managers and students and also the basis of scientific data for further research

* Structure of the research

This study includes five chapers:

Chaper 1: Introduction

Chaper 2: Literature Review

Chapter 3: Reseach Methodology

Chapter 4: Results and Discussion

Chapter 5: Conclusions and Recommendations

CHAPTER 2 LITERATURE REVIEW 2.1 Agricultural insurance

2.1.1 Concept of agricultural insurance

Agricultural insurance is a non-life insurance that covers insurance risks arising from agricultural production and rural life, including risks associated with: crops and livestock, supplies, goods, raw materials, workshops (Dinh, 2008)

Agricultural insurance is defined as a method of risk transfer carried out through agricultural insurance contracts; in which insurance buyers, including farmers, fishers, farm owners, cooperative groups, cooperatives, enterprises and organizations and individuals engage in agricultural and aquatic production accept insurance fees, and; the insurers commit to pay or compensate the beneficiaries if any accident in agricultural production occurs (Dinh, 2008)

2.1.2 Significance of agricultural insurance

Agricultural insurance has an important significance; it supports local famers by reducing the damages when they face risky events

Agricultural insurance helps to restore and maintain a stable financial situation, reduces people's mental anxiety through compensation payment activities, contributes

to the protection of assets and agricultural production, contributes to stabilizing life for millions of people at the same time, stabilizes prices in the free market, especially prices of food and foodstuff (Dinh, 2008)

Agricultural insurance is able to reduce the burden on the state’s budget and improve the efficiency of the allocation of resources in society (Dinh, 2008) Therefore,

in order for insurance to reduce the level of damage, to reduce the funding from the state’s budget and to create the right to take initiative in preventing and limiting losses, the participation in agricultural insurance for people in rural areas is essential

2.1.3 Types of common risks in agrculture

- Weather-related risks: are risks associated with unpredictable weather phenomena such as storm, inundation, drought, deep cold, damaging cold (Nham, 2017)

- Risks associated with agricultural production: Risks related to factors such as pests, diseases of crops and livestock and the effects of processing lines in agricultural production (Nham, 2017)

- Economic risks: risks related to fluctuations in prices of agricultural products and input materials due to unpredictable fluctuations of the market (Nham, 2017)

- Financial and commercial risks: these risks are due to the impacts of other manufacturing sectors on agricultural sector

- Institutional risks: are risks occurring from agricultural policies (Nham, 2017)

- Environmental risks: risks due to negative impacts of external activities affecting agricultural production environment This could seriously impact farmers' inability to reinvest in production and if so, the ability to recover losses takes a lot of time, especially when these fluctuations affect all agriculture (Nham, 2017)

2.2 Agriculture pilot insurance

In the pilot phase of agricultural insurance according to Decision 315/QD-TTg dated 1/03/2011 of the Prime Minister, the Decision agricultural insurance on a pilot basis during for the period 2011-2013 was stipulated:

2.2.1 Objects of the aquaculture section of the pilot insurance

The objects of the government pilot aquaculture insurance were black tiger shrimp, whiteleg shrimp (shrimp); and cat fish (fish) These are cultivated commercially in aquaculture facilities Specifically: fish in Ben Tre and Tra Vinh; black tiger shrimp and shrimp in Ben Tre, Bac Lieu, Ca Mau, Soc Trang and Tra Vinh (Nguyen and Pongthanapanich, 2016 and Nguyen and Jolly, 2018)

2.2.2 Scope of the pilot aquaculture insurance

a) Types of natural disasters and dangerous epidemics insured in aquaculture insurance

(i) Types of natural disasters: Storms, floods, droughts, cold, frosts, saltwater

intrusion, tsunamis, and thunderstorms (Ministry of Agriculture and Rural

Development, 2012)

(ii) Types of diseases:

- For cat fish: liver and kidney pus disease (Ministry of Agriculture and Rural Development, 2012)

- For black tiger shirmp (penaeus monodon): White spot virus, yellow head disease, liver and pancreas necrosis and atrophy disease (Ministry of Agriculture and Rural Development, 2012)

- For whiteleg shrimp: White spot virus, yellow head disease, Taura syndrome disease, liver and pancreas necrosis and atrophy disease (Ministry of Agriculture and Rural Development, 2012)

b) Conditions covered by the pilot aquaculture insurance

(i) Purchase agricultural insurance in accordance with regulations;

(ii) The insureds must comply with the aquaculture process issued together with Circular 47/2011/TT-BNNPTNT or the Process of the Department of Agriculture and Rural Development approved by the Provincial People's Committee

(iii) The insured must send a monthly declaration (form) to the insurer through the insurance holder or the Commune People's Committee or an insurance agent on the 15th of the situation of rearing

(iv) Must apply preventive measures as prescribed, including:

- Aquaculture is located in the planned areas;

- Stocking on the right schedule;

- Breeds must be quarantined and tested without dangerous diseases as prescribed (for black tiger shirmp and whiteleg shrimps);

- When fish kill, farmers must report local authorities and be handled according

to regulations (for black tiger shrimp and whiteled shrimp)

(vi) When detecting epidemics or natural disasters, the insured must take initiative in all measures to limit losses and immediately notify insurance enterprises

or local government agencies for settlement

(vii) Announcing or confirming types of epidemics and natural disasters occurring in the area of the Chairman of the Provincial People's Committee; In case the disease is not yet serious enough, the district People's Committee will confirm the type of disease occurring in communes

c) No compensation for the following cases

(i) Intentionally poisoning or causing injury to farmed shrimp/fish;

(ii) Losses caused by epidemics within 10 days of stocking;

(iii) The insurer has the right to refuse to compensate a part of the insurance indemnity because the insured person does not follow good farming practices according to the regulations of the Ministry of Agriculture and Rural Development and advice from competent agricultural agents

(iv) Toxic: Any chemicals that contaminate water and dangerous to the shrimp and human

(v) Other exclusions:

- Arbitrarily change the area of the insured farm without informing the insurers

- Monthly declaration is not true to the actual growing condition

d) State support levels for beneficiaries under the pilot project were:

According to the Prime Minister's Decision No 315/QD-TTg dated March 1,

2011, State support levels and beneficiaries were:

(i) To support 100% of insurance premiums for poor farm households and farmers that participate in agricultural insurance

(ii) To support 80% of insurance premiums for farm households and farmers living just above the poverty line that participate in agricultural insurance The classification of poverty is defined (renewed respectively) in the Decision 09/QD-TTg dated 30 January 2011 of the Prime Minister on applying for poor households for the period of 2011-2015 The criteria are: Poor households in rural areas are those having average monthly income of VND400 000 or below; near-poor households in rural areas are those having average monthly income from VND 401,000 to VND 520,000 ($1.00 U.S =23,000 VND) Farmers’ participation in the pilot program on agriculture insurance is on a voluntary basis

(iii) To support 60% of insurance premiums for other farm households and farmers that participate in agricultural insurance

(iv) To support 20% of insurance premiums for agricultural production organizations that participate in agricultural insurance

2.2.3 Insurance premium

According to Decision No 315/QD-TTg, insurance premiums is the amount of money that an insurance enterprise earns from a part of the insured and a part of the State's support

For seafood insurance: Insurance is calculated by the ratio of the premium multiplied by the sum insured and shown in the insurance policy

According to Article 6, Rules, fees and liability levels for shrimp/fish insurance, premium rates and the formula for calculating the insurance amount are prescribed as follows:

Table 2.1 Premium rate

IA: Insurance amount (VND)

FA: Farming area (m2)

FD: Farming density (m2)

AFWS: Average fd weight of shrimp

In which tiger shrimp is 0.03 kg/head,

white shrimp is 0.02 kg/head

AFP: Average feed price (VND / kg)

PB: Price to buy breeds

In which:

IA: Insurance amount (VND) FV: Faming volume (m3) FD: Faming density (con/m3) AFWF: Average food weight of fish In which, cat fish is 1.8 kg/head, basa fish

is 0.02 kg/head AFP: Average feed price (vnd/kg) PB: Price to buy breeds

2.2.4 Indemnity

Compensation amount: is an amount in VND that an insurance enterprise has to pay to the insured to compensate for their farms damaged by the reasons stated in the insurance When a risky event occurs, the insurer will pay the insured the compensation amount calculated according to the following formula:

Compensation = (Damage losses rate are insured x Insurance amount) x (100% -

Deduction rate)

The deductible level is calculated as 30% of the compensation on each damaged farming by the causes within the scope of insurance that the insured must bear

Table 2.3 Rate of damage covered for whiteleg shrimp The

Rate of insured loss (%)

highest amount is the limit price; or the replacement product of the intended product with an economic value lower than the useful value The highest price that the customer accepts to pay is equal to the economic value of the substitute product being the maximum price The willingness to pay is defined as the highest price of an individual willing to accept payment for a good or service (Breidert C, 2005).

According to economic theory, each individual's willingness to pay (for a single item) shows the monetary value that the person determines for that item In contrast, monetary value also shows the attraction of that item to each individual The willingness to pay can be measured through changes in consumer surplus The total WTP (WTP) is the area under the demand curve which is limited by the volume of consumption corresponding to the market price (Binh, 2006)

If we want to estimate an individual's WTP for a commodity, the first best estimate of benefits must be the consumption estimate (of the customer) for that type

of goods According to Phung Thanh Binh (2006), the formula for determining the total willingness to pay is:

Total willingness to pay = Demand x market price + comsumer surplus

Figure 2.1 Total willingness to pay

Regression method was used by author to evaluate the factors affecting WTP for whiteleg shrimp insurance in Tra Vinh province How does it affect the willingness

to pay by farmers Determining the willingness to pay for farming for whiteleg shrimp insurance was modeled as

The model used is a linear regression model of the form:

socio-Considering the effect of factors on WTP will tell us which factors are most influential; which factors affect the least; and, which factors do not affect From there,

it is possible to analyze and assess the current status of research issues and make suggestions for attracting people to participate in insurance for whiteleg shrimp in three districts of Tra Vinh province

2.4 Related domestic and foreign studies

2.4.1 Foreign studies

There are many studies that deal with agricultureal insurance For decades, international organizations, especially the World Bank and the Food and Agriculture Organization of the United Nations, have evaluated research and organized projects to fund crop and animal insurance in many poor and developing countries

Smith and Baquet (1996) considered the multi-risk insurance product needs of wheat farms in Montana (USA) With the use of expected utility theory, the two authors pointed out that: loans, education levels, attitudes toward farm operators' risk and if the farm ever had to receive benefits due to natural ears are factors that motivate farmers to participate in insurance What is special in this study is that the premium

does not affect the insurance decision

Cabas et al (2008) have studied the factors affecting people's decision to participate in crop insurance "Modeling Exit and Entry of Farmers in a Crop

Insurance." Program " The authors analyzed specific factors that affect participation in agricultural insurance In addition, the research approaches also distinguish between price and productivity variables rather than gross profit Therefore, it is possible to prove that price variables are particularly important for availability crop insurance

Author John Ulimwengu and Prabuddha Sanyal (2011) studied people's willingness to pay for agricultural insurance programs: "Joint Estimation of Farmers' Stated Willingness to Pay for Agricultural Services" By using the probit multivariate model, the author showed that access to extension services tends to reduce the household's willingness to participate in agricultural insurance Access to markets plays an important role Farmers are willing to participate if the market is more available than those who do not have access to the market Land use rights also affect people's willingness to participate The larger the land use size, the higher the level of willingness to participate in agricultural insurance

Research by Oyinbo et al (2013) among the factors affecting the decision to participate in the agricultural insurance of the Negeria, the author used the sampling method and questionnaire for 120 farmers The results showed that factors such as age, education level, farm size and access to credit are important variables that affect farmers' willingness to participate in the agricultural insurance program

2.4.2 Domestic research

According to Nguyen and Pongthanapanich (2016), the aquaculture pilot insurance was implemented in the southern provinces of Ben Tre, Bac Lieu, Ca Mau, Soc Trang and Tra Vinh, covering 7487 households that voluntary participated The natural risks covered were typhoon, flood, drought, frost, saltwater intrusion and tsunami The diseases covered for pangasius were liver and kidney bacterial diseases, and white spot syndrome, yellow head disease, infectious hypodermal and hematopoietic necrosis virus and acute hepatopancreatic necrosis disease (AHPND) or early mortality syndrome for black tiger shrimp For whiteleg shrimp, the same diseases of black tiger shrimp were covered plus taura syndrome and infectious myonecrosis virus The aquaculture insurance faced many difficulties largely because

of the frequent and widespread epizootics The overall result showed that the aquaculture insurance was not well managed Moral hazard behavior was noted

Without sufficient evidence and data to support claim processes, many claims were denied loss compensation

Research by Phan Dinh Khoi et al (2014) on pilot program on voluntary insurance on shrimp farmers in Bac Lieu province after two years of implementation showed that the number of shrimp farmers participating in insurance and farming areas covered are still very low compared to the target of the program At the same time, the study also showed that farmers who work locally, access to insurance information and pond areas are positively correlated with the decision of farmers to participate in insurance The level of education is correlated negatively with the decision of voluntary insurance participation of shrimp farmers Factors such as gender, participation in training, experience, borrowing, and production costs do not affect the decision to participate in voluntary insurance in shrimp farming in Bac Lieu province

According to Nguyen (2015), factors such as household types, technical training, risk level according to household's assessment, information on voluntary insurance and farm size are factors that affect the willingness to pay for voluntary insurance of rice growing households in Chuong My district, Hanoi city

Luong (2015) examines the factors affecting household willingness and voluntary insurance coverage, assuming household production scale and support policies (such as credit and agricultural extension) have a great influence on participation decisions as well as payment for rice insurance of rural households in Tien Du district, Bac Ninh province

Nguyen Duy Chinh et al (2016) used Logit regression to determine factors affecting farmers' decision to participate in rice insurance in Can Duoc district, Long

An province As a result, the more interested the household is in the premium and the more people depend on rice, the more likely the trend is to participate in insurance In contrast, factors such as the size of the cultivated area, the yield of rice and the experience of rice production negatively affect by the willingness to participate in voluntary insurance on rice Other household characteristics such as age of the headh

of household, gender do not affect the decision to participate in insurance

According to Dang Kim Khoi et al (2016), the problems of information communication, product risk coverage, product diversity, procedures of compensation

assessment and support fees impacted on the level of participation of rice farmers in

Dong Thap province and livestock households in Vinh Phuc

In summary, domestic studies have shown factors such as households working locally,

accessing insurance information, farm size, education levels, and credit policies affect

the decision of farmers to participate in voluntary insurance and willingness to pay

voluntary insurance

2.5 Analytical framework of research

This research framework is based on review of literature and previous

theoretical microeconomic principles encountered in studies related to willingness to

pay for whiteleg shrimp insurance The cost of production is related to the cost of

insurance coverage and the proposed premium The willingness to participate therefore

is related to socioeconomic and demographic factors such as age, experience,

education,number of dependents in the household, available information and the

participation in a community group

The unit determines the amount of premium available to pay based on the total cost of production

2.6 Summary of previous research and hypothesis development

The issue of agricultural insurance in general and whiteleg shrimp insurance in particular is a new issue to be tested, the research on the decision to participate in insurance mentioned above are not much The following are similar studies, the author selected as a basis to choose variables for the model of this study

Table 2.4 Summary of variables in previous research models

Author and research name Variables affect Y

Phan Dinh Khoi and Quach

Vu Hiep, (2014), “Analysis

of factors affecting the

decision to participate in

shrimp farming insurance

for households who are

eligible to participate in the

pilot program of shrimp

farming insurance in Bac

Lieu province "

- Gender of the head of household

- Education level of the head of household

- Number of years of shrimp farming of head of household

- Participate in technical training on farming

- There are members working locally

- Receive information on shrimp farming insurance

- Having loans for shrimp farming activities

- Shrimp pond area (1,000 m2)

- Cost of investing one crop per 1,000m2 of water surface

Nguyen Quoc Nghi et al

(2012), "Demand for

agricultural insurance of

dragon fruit farmers in Cho

Gao district, Tien Giang

province"

- Education level of the head of household

- Dragon fruit growing area of households (1,000

m2)

- Participate in technical training on dragon fruit cultivation

- Participate in organizing local associations

- Investment cost of 1,000 m2 of dragon fruit land of households

- The total number of risks that households met in a recent crop

Nguyen Duy Chinh et al,

2016, "Factors affecting the

* Selection of variables for regression models to assess factors affecting the willingness to pay for whiteleg shrimp of farmers

According to Luong Thi Ngoc Ha (2015), many factors deciding to participate in agricultural insurance also affect the willingness to pay insurance for whiteleg shrimp Therefore, the author choosed the variables used in analyzing the willingness to pay for whiteleg shrimp insurance as the table below:

Table 2.5 Variables used in model to analyze the willingness to pay for whiteleg

DEPENDDBELONGING: Number of dependents

AIINFORMATION: Receive information of whiteleg

COMMPARTICIPATION: Join the community team

Expectation of variables’ marks: The factors that influence the willingness to pay

for whiteleg shrimp insurance are proposed by the author above with the following expectations about the marks:

- Age: The number of years living in the locality, the more experience they are in

the risks of shrimp farming, are aware of the benefits of agricultural insurance and the decision to pay for insurance or not Therefore, in the study, the author expects a positive relationship between the willingness to pay for insurance and the age of the

H1: The higher the age of the head of household, the higher the willingness to pay for insurance for whiteleg shrimp

- Education levels of the head of households: The education levels of the head

of household is measured by the number of years of schooling High level of education will increase the awareness of production risks and how to overcome such risks, and may influence the farmer’s participation in the insurance program Smith and Baquet (1996) argued that with the use of expected utility theory, education levels of farmers

is a factor that motivates them to participate in insurance Therefore, in the study, the author expects a positive relationship between education level of the head of household and decision to participate in an insurance program (+)

H2: The higher the education level of the head of the household, the higher the willingness to pay for insurance for whiteleg shrimp

- Experience years: The more years of experience in white leg shrimp farming, the greater the willingness to pay for insurance for whiteleg shrimp and vice versa Therefore, the coefficient is expected to be positive (+)

H3: If the number of years of experience of the head of household is high, the willingness to pay for insurance for white leg shrimp will increase

assets invested in shrimp farming and the higher the risk of diseases That is, the larger the farming area, the higher or lower the willingness to pay However, the research results of Ha (2015), the factor of farming area has the opposite effect to the willingness to pay insurance Therefore, the author expects that the cultured area may have a (+/-) sign

H4: If the area of shrimp farming increases, the willingness to pay for whiteleg shrimp insurance will increase or decrease

- Number of dependents: According to the author, the larger the number of

dependents in the family, the more likely the head of the household will be willing to pay for the whiteleg insurance compared to those with less dependents

H5: The greater the number of dependents, the lower the willingness to pay for white leg shrimp insurance

- Insurance information: This is a variable that determines the ability to

understand insurance information such as: Premium rates, compensation procedures