Farmers' Preferences for Crop Insurance Attributes

Utilizing survey data from corn and soybean farmers in the Midwest, this study assesses the relative importance of different features of crop insurance products. Conjoint analysis results indicate that farmers' preferences for flexibility dominate both type of insurance and coverage level. Revenue insurance demand is greater by those who are larger, younger, and farm in more separate locations. Results are significant and consistent by size, insurance usage, leverage, and risk perception. The results permit prediction of market shares of competing insurance products within specific producer segments, and thus also provide guidance for targeting specific producer groups with new product configurations.     

Factors Influencing Farmers' Crop Insurance Decisions

Farmers' decisions to purchase crop insurance and their choices among alternative products are analyzed using a two-stage estimation procedure. The influences of risk perceptions, competing risk management options, as well structural and demographic differences are evaluated. The likelihood for crop insurance usage is found to be higher for larger, older, less tenured, more highly leveraged farms, and by those with higher perceived yield risks. The marginal effects of size, age, perceived yield risk, perceived importance of risk management activities, and other structural and demographic variables are identified in terms of their influences on choices among alternative crop insurance products.     

Farmers' Health Insurance and Access to Health Care

We estimate farmers' health care consumption given their insurance status, explicitly taking into account the possible endogeneity of insurance. Data come from the 1996–2001 waves of the Medical Expenditure Panel Survey conducted by the Agency for Healthcare Research and Quality. Results show that farmers have problems accessing affordable health insurance coverage, and these access problems lead to an overall reduction in the utilization of health care services by uninsured farmers. After controlling for selection, we observe quantitatively large and statistically significant direct effects of uninsurance on the utilization of health care services.     

Crop Insurance Valuation under Alternative Yield Distributions

Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.     

Crop Insurance in a Political Economy: An Alternative Perspective on Agricultural Policy

Lawmakers often subsidize farmers in times of financial distress. This article models this political impulse as a constraint on government farm policy, describing how ex ante government farm insurance can deter ex post "disaster relief" and improve production incentives by countering the moral hazard that otherwise prevails. Absent ex ante government policy, ex post relief takes the form of revenue insurance, which prompts excessive entry into farm production and under-production by operating farmers. Ex ante government policy can raise economic and political welfare by buying out low productivity farmers and offering profitable farmers a combination of revenue insurance, price supports, and a program participation fee.     

A Comparative Evaluation of Yield Risk Reductions with Alternative Crop Insurance Programs in Manitoba

Three crop insurance programs are evaluated in terms of their effectiveness of yield risk reductions for 371 Manitoba farms. The examination is first conducted with a proposed index method, with which the relative yield risk reduction magnitude is calculated and compared for each farm under each alternative program. The generalized stochastic dominance (GSD) methodology is also used to provide an alternative analytical framework in analyzing producers’relative preferences among those alternatives by comparing the net yield distributions generated by each program for each farm. The results suggest that, given an actuarially sound basis, the filly individualized crop insurance (FI) program is the most favorable choice for risk-averse producers. The area coverage and individual indemnity program (IA) is generally the second best option. The full area crop insurance program (FA) is least preferred by risk-averse farmers.     

Designing Optimal Crop Revenue Insurance

When the indemnity schedule is contingent on the farmer's price and individual yield, an optimal crop revenue insurance contract depends only on the farmer's gross revenue. However, this design is not efficient if, as is the case with available contracts, the coverage function is based on imperfect estimators of individual yield and/or price. The producer's degree of prudence and the extent of basis risks have important influences on the optimal indemnity schedule. In this broader context, optimal protection is not provided by available U.S. crop insurance contracts and may include combinations of revenue insurance, yield insurance, futures, and options contracts.     

Optimal Area-Yield Crop Insurance Reconsidered

The implementability of area-yield insurance contracts in the presence of symmetric and asymmetric information about the farmer's "beta" linking his yield to the risk-pool's yield is examined. In the presence of fixed costs and symmetric information Mahul's result that optimality requires setting the slope of the indemnity schedule equal to each farmer's beta is confirmed. When there is asymmetric information between the insurer and the farmer, however, this full-insurance contract is vulnerable to adverse selection, and therefore may not be implementable for general cost structures. The optimal area-yield insurance contract under asymmetric information is characterized.     

Constrained Efficient Contracts for Area Yield Crop Insurance

With area yield crop insurance, indemnification occurs when area yield falls below a yield trigger that is chosen by the producer. The maximum value for this yield trigger is generally restricted (e.g., 80% of the long term area average yield). The impact of this trigger constraint on the optimal design of an area yield insurance contract is examined. Within the constrained efficient contract, indemnities consist of both a lump sum payment and a payment that is proportional to the yield shortfall. Because lump sum payments may not be feasible to implement, efficiency-enhancing modifications to standard contracts are also proposed.     

Crop Insurance Under Catastrophic Risk

We develop a new insurance model that shows how catastrophic risk affects the nature and existence of a crop insurance market equilibrium. A reservation preference level is used to characterize long-run equilibrium when catastrophic risk makes insurance companies risk responsive. Catastrophic risk is shown to increase premiums, reduce farmer coverage levels and, under some conditions, lead to a complete breakdown of the crop insurance market. Reinsurance can help facilitate an equilibrium and/or increase participation, particularly if the reinsurance is subsidized. The analysis has important implications for the design and management of crop insurance and reinsurance programs.     

完善种植业惠农补贴政策的若干思考——以湖北省5县市调查为例

通过对湖北省潜江市、枣阳市、大冶市、沙洋县和浠水县等5县市的调研,笔者发现种植业惠农补贴政策能够起到保障粮食安全、促进农民增收的积极作用。但是,由于政策不完善、相关措施不配套,在很大程度上削弱甚至抵消了补贴政策效应。基于此,笔者在剖析农资价格上涨、弱化补贴效应等问题的基础上,提出了构建弹性补贴机制等完善种植业惠农补贴政策的若干设想。     

基于农户偏好的牲畜粪便污染治理政策选择——以生猪养殖为例

本文基于全国5省754户生猪养殖农户的调查数据,运用选择实验方法,借助多元Logit模型和随机参数Logit模型分析了农户对牲畜粪便处理技术支持、牲畜粪便排污费、牲畜粪便排污技术标准、沼气补贴和粪肥交易市场5种牲畜粪便污染治理政策的偏好。结果表明:沼气补贴、牲畜粪便处理技术支持、牲畜粪便排污费和粪肥交易市场4种牲畜粪便污染治理政策对农户提高环境友好型牲畜粪便处理率影响显著,牲畜粪便排污技术标准政策对农户提高环境友好型牲畜粪便处理率影响不显著。农户对不同的牲畜粪便污染治理政策的偏好程度具有较大差异,对沼气补贴政策的偏好程度最高,其次是牲畜粪便处理全面技术支持政策和牲畜粪便排污费政策,之后是牲畜粪便处理一般技术支持政策,最后是粪肥交易市场政策。分区域的稳健性检验结果表明,不同区域的农户对不同牲畜粪便污染治理政策的偏好程度具有显著差异。     

The Economics of Crop Hail Insurance

The demand for crop hail insurance is examined in both static and dynamic models and both with and without all-risk crop insurance. Contrary to general results on optimal insurance with background risk, crop revenue uncertainty induces the farmer to decrease rather than increase coverage. The underinsurance results are strengthened when farmers are able to dynamically update their insurance portfolio as information about the value of the crop is revealed over time. When hail insurance is purchased along with all-risk crop insurance, two alternative approaches are examined and their efficiency properties compared.
Nous examinons la demande d'assurance-grêle au moyen, à lafois, de modèles statiques et de modèles dynamiques, chacun intégré ou non à une assurance tout-risque. Contrairement à ce qu'on observe généralement pour le niveau d'assurance optimal établi enprésence d'un risque sous-jacent, l'incertitude quant au rendement des cultures attendu incite l'exploitant agricole à réduire, plutôt qu'à augmenter, sa couverture. Les résultats de cette sous-assurance sont améliorés lorsque l'exploitant est capable d'actualiser régulièrement son portefeuille d'assurance à mesure que la valeur finale de la récolte se précise. Dans le cas de l'assurance-grêle achetée dans le cadre d'une assurance-récolte tout-risque, nous comparons deux options quant à leur possibilité de rendement économique.     

Can Normality of Yields Be Assumed for Crop Insurance?

Normality of crop yield residuals pooled to the state and regional level is examined using a procedure that accounts for trend and heteroscedasticity. Normality tests are conducted using farm-level yield data from over 200,000 producers of six crops in seven U.S. states. The results indicate consistent non-normality of crop yields. The effects of assuming normality on insurance premium rates are examined. Assuming normality is found to generate premiums that can differ substantially from premiums derived using data-based empirical distributions.
Montana Agricultural Experiment Station Journal Series No. 2001-7. The Risk Management Agency, USDA, also provided support for this research. The views expressed herein are the authors' and do not necessarily represent those of Montana State University or the Risk Management Agency.
Les auteurs ont analysé la normalité du rendement résiduel des cultures à l'échelon de l'État et à l'échelon régional au moyen d'une méthode tenant compte des conjectures et de l'hétéroscédasticité. Ils ont utilisé les données sur le rendement fournies par plus de 200 000 cultivateurs produisant six cultures dans sept États américains pour effectuer des tests de normalité. Les résultats révèlent l'anormalité constante des rendements. Les auteurs s'interrogent sur les conséquences d'une normalité hypothétique sur les primes d'assurance. En supposant des rendements normaux, on obtient des primes sensiblement différentes de cedes calculées avec une distribution empirique des données.     

Is There a Viable Market for Area-Based Crop Insurance?

The performance of area yield insurance and farm-level multiple peril crop insurance is analyzed for cotton and soybean production in Georgia and South Carolina. The analysis improves on many previous studies by utilizing actual farm-level yield data and by comparing the two types of insurance products not only for actuarially fair premium rates but also for actual unsubsidized and subsidized premium rates. Results suggest that, even in heterogeneous production regions, area yield insurance may be a viable alternative to farm-level insurance when premium rates for farm-level insurance contain large positive wedges.     

Crop Insurance as a Strategy for Adapting to Climate Change

Financial insurance for extreme events can play an important role in hedging against the implications of climate change. This paper combines a comprehensive estimation strategy and a unique panel dataset to study the role of financial insurance in farmers' welfare under uncertainty. Data are drawn from a large Italian farm panel dataset. We find that (i) demand for insurance products is likely to increase in response to climatic conditions, and (ii) that the use of insurance reduces the extent of risk exposure. We also find that farms growing more crops are less likely to adopt the insurance scheme. This confirms what is found in the theoretical literature. Crop diversification can be a substitute for financial insurance in hedging against the impact of risk exposure on welfare.     

森林保险市场的供求均衡与财政补贴制度

本研究认为森林保险经过较长时间的试点后,没有得到普遍的开展的原因在于森林保险市场的供求失衡。从国际经验看,解决森林保险市场的失衡要依靠财政补贴制度。研究结果表明:中国森林保险的财政补贴应包括保费补贴、业务费用补贴、再保险支持、税收优惠和建立风险基金。     

Using Consumption and Asset Return Data to Estimate Farmers' Time Preferences and Risk Attitudes

The generalized expected utility model is fitted to U.S. farm data to estimate farm operator's time preferences and risk attitudes. The estimated farmer's utility parameters are quite 'reasonable' and exhibit high accuracy. The forward-looking expected utility model is soundly rejected in favor of the generalized expected utility paradigm. Importantly, the generalized expected utility model is also found to fit the data better than the myopic model typically used to study agricultural production under risk. Finally, U.S. farmers' relative aversion to risk appears to have diminished significantly over time.