Can Crop Insurance Premiums Be Reliably Estimated?

This paper develops and applies a methodology to assess the accuracy of historical loss-cost rating procedures, similar to those used by the U.S. Department of Agriculture’s Risk Management Agency (RMA), versus alternative parametric premium estimation methods. It finds that the accuracy of loss-cost procedures leaves much to be desired, but can be markedly improved through the use of alternative methods and increased farm-level yield sample sizes. Evidence suggests that the high degree of inaccuracy in crop insurance premium estimations through historical loss-cost procedures identified in the paper might be a major factor behind the need for substantial government subsidies to keep the program solvent.


Issue Date:
2011-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/107091
Published in:
Agricultural and Resource Economics Review, Volume 40, Number 1
Page range:
81-94
Total Pages:
14




 Record created 2017-04-01, last modified 2017-08-26

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