Premium Estimation Inaccuracy and the Actuarial Performance of the US Crop Insurance Program
AbstractThis article explores the impact of the likely levels of inaccuracy associated with two main types of premium estimation methods, under different sample sizes, on the actuarial performance of the US crop insurance program. The analyses are conducted under several plausible assumptions about the insurer versus the producers’ estimates for their actuarially fair premiums. Significant differences are found due to estimation method and sample size, with the currently used procedures resulting in the worse actuarial performance. Several conclusions and recommendations are provided that could markedly reduce the amount of public subsidies needed to keep this program solvent.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 102463.
Date of creation: 2011
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Agricultural Subsidies; Crop Insurance Premium Estimation; Loss-Cost Procedures; Risk Management Agency; Financial Economics;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-05-07 (Agricultural Economics)
- NEP-ALL-2011-05-07 (All new papers)
- NEP-IAS-2011-05-07 (Insurance Economics)
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