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Asymmetric Information in the Market for Yield and Revenue Insurance Products

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Author Info
Makki, Shiva S.
Somwaru, Agapi
Abstract

This report analyzes farmers' choice of crop insurance contracts and tests for the presence of asymmetric information in the market for multiple yield and revenue insurance products. Farmers' risk characteristics, their level of income, and the cost of insurance significantly affect their choices of yield and revenue insurance products as well as their selections of alternative coverage levels. Empirical analysis indicates that, in the presence of asymmetric information, high-risk farmers are more likely to select revenue insurance contracts and higher coverage levels. The results also indicate that premium rates do not accurately reflect the likelihood of losses, implying asymmetrical information in the crop insurance market.

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File URL: http://purl.umn.edu/33587
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Publisher Info
Paper provided by United States Department of Agriculture, Economic Research Service in its series Technical Bulletins with number 33587.

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Date of creation: 2001
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Handle: RePEc:ags:uerstb:33587

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Related research
Keywords: asymmetric information; adverse selection; crop insurance; revenue insurance; risk management; Risk and Uncertainty;

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  1. Cory G. Walters & C. Richard Shumway & Hayley H. Chouinard & Philip R. Wandschneider, 2008. "Information and Opportunistic Behavior in Federal Crop Insurance Programs," Working Papers 2008-9, School of Economic Sciences, Washington State University. [Downloadable!]
  2. Bokusheva, Raushan, 2004. "Crop insurance in transition: A qualitative and quantitative assessment of insurance products (Preliminary results)," IAMO Discussion Papers 14869, Institute of Agricultural Development in Central and Eastern Europe (IAMO). [Downloadable!]
  3. Alexander E. Saak, 2004. "On the Premium for Revenue Insurance under Joint Price and Yield Risk," Food and Agricultural Policy Research Institute (FAPRI) Publications 04-wp368, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
  4. Lin, William & Somwaru, Agapi & Tuan, Francis & Huang, Jikun & Bai, Junfei, 2004. "Consumer Attitudes Toward Biotech Foods in China," 2004 Annual meeting, August 1-4, Denver, CO 20359, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  5. Makki, Shiva S. & Somwaru, Agapi, 2002. "Asymmetric Information In Cotton Insurance Markets: Evidence From Texas," 2002 Annual meeting, July 28-31, Long Beach, CA 19827, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  6. Saak, Alexander, 2004. "On the Premium for Revenue Insurance under Joint Price and Yield Risk," Staff General Research Papers 12001, Iowa State University, Department of Economics. [Downloadable!]
  7. Alexander E. Saak, 2004. "On the Premium for Revenue Insurance under Joint Price and Yield Risk," Center for Agricultural and Rural Development (CARD) Publications 04-wp368, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
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This page was last updated on 2009-12-26.

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