PREMIUM RATE DETERMINATION IN THE FEDERAL CROP INSURANCE PROGRAM: WHAT DO AVERAGES HAVE TO SAY ABOUT RISK?

This article reviews actuarial procedures used to calculate premium rates in the federal crop insurance program. Average yields are used as an important indicator of risk under current rating practices. The strength and validity of this relationship is examined using historical yield data drawn from a large sample of Kansas farms. The results indicate that assumed relationships between average yields and yield variation are tenuous and imply that rating procedures that rely on average yields may induce adverse selection.


Issue Date:
1994-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/30747
Published in:
Journal of Agricultural and Resource Economics, Volume 19, Number 2
Page range:
382-395
Total Pages:
14




 Record created 2017-04-01, last modified 2017-08-24

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