German farmers' perceived usefulness of satellite-based index insurance: insights from a transtheoretical model

Abstract

Purpose

Index insurance is promising to mitigate drought-related income losses in agriculture. To reduce the basis risk of index insurance, the integration of satellite data is of growing interest in research. The objective of this study is to obtain preliminary evidence regarding farmers' perceived usefulness (PU) of satellite-based index insurance.

Design/methodology/approach

By modifying the transtheoretical model of change to a transtheoretical model of PU, German farmers' gradual PU of satellite-based index insurance was investigated.

Findings

The results show that the average farmer perceives satellite-based index insurance as useful. It can be particularly seen that a higher level of education in an agricultural context as well as higher trust in index insurance products increases farmers' gradual PU. Moreover, higher relative weather-related income losses increase farmers' gradual PU.

Research limitations/implications

It is recommended to apply latent variables when conducting future investigations regarding farmers' PU.

Originality/value

To the best of the authors' knowledge, this is the first study to explore farmers' PU of upcoming satellite-based index insurance by modifying and applying the transtheoretical model in a new way.

Citation

Nordmeyer, E.F. and Musshoff, O. (2023), "German farmers' perceived usefulness of satellite-based index insurance: insights from a transtheoretical model", Agricultural Finance Review, Vol. 83 No. 3, pp. 511-527. https://doi.org/10.1108/AFR-10-2022-0125