Research On Probability Distortion In Farmer's Insurance Decision-making

Agricultural insurance is an important rural financial instrument.The Nineteenth National Congress of the Communist Party of China(CPC)put forward that in order to build modern agriculture,the government should take measures to realize the sustainable development strategy of agricultural insurance through system innovation.At present,China's agricultural insurance has entered a new stage of accelerating innovation and development.However,in practice,China's agricultural insurance has adopted the voluntary insurance.Even under the premise of the government's premium subsidies,it is difficult to arouse farmers' willingness to insure and to effectively implement agricultural insurance.The sustainability of agricultural insurance has been questioned.Then,with the government's high subsidies,the cost of farmer's insuring greatly reduced and the high compensation rate,agricultural insurance has become a "public welfare" product,however,the enthusiasm of farmer's insuring behavior is still difficult to improve.Farmers' insurance decision-making is not consistent with the conclusion of traditional risk decision-making theory.These are urgent problems to be solved in the development of agricultural insurance.The current agricultural insurance product system has many problems,such as single product,non-diversity and differentiation,which cannot meet the needs of multi-level risk management in the process of modern agricultural development.Agricultural operators have different risk attitudes and scale of operation.Facing similar risks and the same insurance level under the same risk conditions,farmers with different risk attitudes and insurance knowledge will show different needs,which also means that the choice of agricultural insurance quota should be multi-level and diversified.So,after having more options,it is an important proposition for farmers to "correctly" choose the insurance plan according to their risk attitude and risk perception.Therefore,this paper attempts to use the data of farmers' insurance quota selection in Apple Insurance to estimate the structural model of farmers' risk selection.This paper constructs a structural model in the form of probability distortion,and explores how farmers choose insurance quotas.We try to discover whether there is probability distortion in the selection of agricultural insurance quotas,and study farmers' choice behavior from the perspective of behavioral finance.The results show that farmers have a probability distortion in the insurance decision-making process,and farmers tend to underestimate the high probability events,which is consistent with the “foreground theory” proposed by Kahneman and Tversky(1979).Farmers have a poor understanding of the controllability of their production processes and the random nature of natural risks,which makes it impossible to make rational judgments on disaster information,which in turn leads to behavioral deviations among farmers in insurance decision-making.In addition,in the insurance decision-making process,farmer subjectively believes that the probability of being exposed to the risk is small or too large,he is not willing to pay too much premium.On the basis of the probability distortion,the article further tests the relationship between the degree of probability distortion and insurance decision-making,and finds that the degree of probability distortion has a negative correlation with the farmers' willingness to pay and the choice of insurance.That is,the greater the degree of probability distortion,the farmers have shown a negative state in insurance investment.This paper attempts to use probability distortion to explain the “irrational” behavior of farmers in insurance decision-making,explain the mystery of the choice behavior deviation of farmer insurance decision-making,and propose corresponding policy recommendations according to the research conclusions,which has certain theoretical and practical significance.