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An Alternative for Reducing Federal Crop Insurance Program Losses

Author

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  • Glauber, Joseph W.
  • Harwood, Joy L.
  • Skees, Jerry R.

Abstract

The Federal crop insurance program saw indemnities exceed premiums by $2.5 billion in the 1980's, a decade of widespread drought and rapid growth in insurance participation. This excess loss, after small surpluses for most of the Federal Crop Insurance Corporation's history, masks the wide variation in performance among crops and regions. More than half of program excess losses were for soybeans (mostly those produced in Arkansas, Georgia, Louisiana, and Mississippi) and wheat (mostly that produced in Montana and North Dakota). An alternative method of crop insurance, with payments based on yield losses in a geographic area rather than those experienced by individual producers, may help to reduce excess losses. A pilot program using such a method is being tested for soybeans.

Suggested Citation

  • Glauber, Joseph W. & Harwood, Joy L. & Skees, Jerry R., 1993. "An Alternative for Reducing Federal Crop Insurance Program Losses," Agricultural Economic Reports 308267, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerser:308267
    DOI: 10.22004/ag.econ.308267
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    File URL: https://ageconsearch.umn.edu/record/308267/files/aer668.pdf
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    References listed on IDEAS

    as
    1. Glauber, Joseph W. & Harwood, Joy L. & Miranda, Mario J., 1989. "Federal Crop Insurance and the 1990 Farm Bill: An Assessment of Program Options," Staff Reports 278249, United States Department of Agriculture, Economic Research Service.
    2. Robert G. Chambers, 1989. "Insurability and Moral Hazard in Agricultural Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 604-616.
    3. Harold G. Halcrow, 1949. "Actuarial Structures for Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(3), pages 418-443.
    4. Jerry R. Skees & Michael R. Reed, 1986. "Rate Making for Farm-Level Crop Insurance: Implications for Adverse Selection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 653-659.
    5. Carl H. Nelson & Edna T. Loehman, 1987. "Further Toward a Theory of Agricultural Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 523-531.
    6. Barnaby, Glenn Arthur, Jr. & Skees, Jerry R., 1990. "PUBLIC POLICY FOR CATASTROPIDC YIELD RISK: An Alternative Crop Insurance Program," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 5(2), pages 1-3.
    7. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
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    Cited by:

    1. Skees, Jerry R., 1993. "Thepouticaleconomy Of A Crop Insurance Experiment," Research Bulletins 123021, Cornell University, Department of Applied Economics and Management.

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