How well does the crop insurance market function in Russia?

In this paper we aim to investigate the demand for crop insurance in Russia, identifying primary influencing factors. We use a cross sectional yearly data set on participation in crop insurance and agricultural production for about 60 regions (oblasts) of Russia for the years 2008-2011. We follow Goodwin’s (1993) approach to estimate the crop insurance demand model with the proportion of planted acres insured as the dependent variables. Our results suggest that the previous subsidy policy to reimburse 50 percent of the insurance premiums has reduced the demand for crop insurance. This may be explained by the negative price elasticity of insurance demand as well as with the cumbersome reimbursement mechanism. Furthermore, operation costs of insurance companies lie above international averages and absorb nearly all governmental subsidies without transferring it to the producers. Therefore, the insurance program in Russia does not function as a subsidy transfer mechanism for farmers. The improvement of the efficiency of the insurance industry in Russia is required in order to increase the attractiveness of the program.

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 Record created 2017-04-01, last modified 2019-08-26

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