Factors influencing smallholder crop farmers’ willingness to pay for weather-based index insurance in Southwest Nigeria

Climate change is intensifying production risks across smallholder agrifood systems, yet uptake of formal risk-transfer mechanisms remains low. Weather-based index insurance (WBII) is widely promoted as a scalable solution, but its adoption is shaped by more than socioeconomic conditions alone. This study advances understanding of WBII demand by examining how climate risk experience and adaptation behavior jointly shape farmers’ willingness to pay (WTP) for WBII. Using survey data from smallholder farmers in Oyo state in southwest Nigeria, we estimate Tobit models integrating socioeconomic characteristics, climate exposure, and adaptation practices. Results show that adaptation behavior, economic capacity, and demographic structure jointly determine insurance demand, though effects vary across specifications. The climate change adaptation practice index, age, household size, on-farm income, and farming experience are consistently significant. Notably, adaptation behavior is negatively associated with aggregate WTP but positively associated with normalized measures (per hectare and per capita), suggesting substitution between self-insurance and formal insurance at different scales. Income and farming experience generally increase WTP, while age and household size reduce it. In contrast, climate risk experience and institutional factors show no direct effects, indicating that exposure and awareness alone do not translate into demandlikely reflecting basis risk concerns. These findings highlight the need for insurance designs aligned with farmers’ adaptive strategies, rather than awareness-focused interventions alone. By reframing insurance demand as part of a wider adaptation system, this study provides new insight into how climate risk management tools can be more effectively designed and deployed in smallholder contexts.