Why Do Farmers Opt for Crop Insurance? A Discriminant Analysis

This study is an attempt towards knowing farmers perspective on Pradhan Mantri Fasal Bima Yojana (PMFBY). Data was collected from 120 sample farmers in Karnataka among which 80 were insured and 40 were non-insured farmers. The results based on information solicited by farmers indicated that continuous drought in the previous years was the motivation to opt PMFBY. Education, farm size and the cost of borrowing from non-institutional sources significantly differed among insurers and noninsurers. Lack of awareness, lack of premium paying capacity and lack of faith were the reasons cited for not availing crop insurance by non-insured farmers. Discriminant analysis estimates revealed that factors like education, income, farm size, previous compensation, source and rate of short-term credit played an important role in discriminating farmers into different groups (loanee, non-loanee and non-insured). Farmers called for quick and transparent settlement of claims among other suggestions like individual farm assessment of losses to improve their participation in PMFBY.