Can Crop Insurance Premiums be Reliably Estimated?
AbstractThe objective of this paper is to compare the accuracy of crop insurance rating methods based on historical liability and indemnity data (similar to the procedure currently used by the Risk Management Agency) and “yield distribution” approaches. Estimated rates are compared to “true” rates using empirically-grounded simulation procedures that take into account common data availability constraints. Simulation results suggest that farm and county level rate estimates using the “yield distribution” approach are significantly more accurate than those based on historical indemnity and liability records.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49465.
Date of creation: 30 Apr 2009
Date of revision:
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crop insurance premiums; non-normal distributions; simulation methods; Agribusiness; Agricultural Finance; Risk and Uncertainty;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-16 (All new papers)
- NEP-CMP-2009-05-16 (Computational Economics)
- NEP-IAS-2009-05-16 (Insurance Economics)
- NEP-RMG-2009-05-16 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan P. Ker & Keith Coble, 2003. "Modeling Conditional Yield Densities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 291-304.
- Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
- Ramirez, Octavio A. & McDonald, Tanya U., 2007. "An Empirically-Grounded Comparison of the Johnson System versus the Beta as Crop Yield Distribution Models," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9814, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 508-519.
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