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Can Crop Insurance Premiums be Reliably Estimated?

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Author Info
Ramirez, Octavio A.
Carpio, Carlos E.
Rejesus, Rod
Abstract

The 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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File URL: http://purl.umn.edu/49465
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Publisher Info
Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49465.

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Date of creation: 30 Apr 2009
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Handle: RePEc:ags:aaea09:49465

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Related research
Keywords: crop insurance premiums; non-normal distributions; simulation methods; Agribusiness; Agricultural Finance; Risk and Uncertainty;

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  1. Xiaohui Deng & Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 89(2), pages 508-519, 05. [Downloadable!] (restricted)
  2. Alan P. Ker & Keith Coble, 2003. "Modeling Conditional Yield Densities," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(2), pages 291-304, 05. [Downloadable!] (restricted)
  3. Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(5), pages 1179-1195, December. [Downloadable!] (restricted)
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This page was last updated on 2009-12-26.

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