Farmers’ Attitudes toward Low-Probability Climate Change Risks: WTP for Hurricane Insurance

Abstract

Natural disasters may increase in frequency and severity in the future as a result of climate change. Understanding about individual risk perceptions and behavioral responses to change of risks are relevant for insurers and government insurance policy makers. This study elicits individual farmer’s risk beliefs and the demand for low-probability, high-impact hurricane insurance using the contingent valuation survey method. The results show using risk graders can facilitate the comprehension of risk by respondents, and has a considerable effect on the level of the WTP and its sensitivity to probability changes.