Crop insurance demand in wheat production: focusing on yield gaps and asymmetric information

Abstract

Analysis of yield gaps were conducted in the context of crop insurance and used to build an indicator of asymmetric information. The possible influence of asymmetric information in the decision of Spanish wheat producers to contract insurance was additionally evaluated. The analysis includes simulated yield using a validated crop model, CERES-Wheat previously selected among others, whose suitability to estimate actual risk when no historical data are available was assessed. Results suggest that the accuracy in setting the insured yield is decisive in farmers' willingness to contract crop insurance under the wider coverage. Historical insurance data, when available, provide a more robust technical basis to evaluate and calibrate insurance parameters than simulated data, using crop models. Nevertheless, the use of crop models might be useful in designing new insurance packages when no historical data is available or to evaluate scenarios of expected changes. In that case, it is suggested that yield gaps be estimated and considered when using simulated attainable yields.Additional keywords: risk management; rainfed wheat; crop insurance penetration rate; crop models; Spain. Abbreviations used: AIC (Akaike information criterion); AsymB (asymmetric information indicator for the insurance option Basic); AsymE (asymmetric information indicator for the insurance option Extended); AsymEc (asymmetric information indicator for the insurance option Extended including the complementary insurance); CyL (Castilla y León); RMSE (root mean square error); SiAR (Sistema de Información Agroclimática para el Regadío); Ya (actual yield); Yexp (expected rainfed yield ); YinsB (average insured yield in option Basic); YinsE (average insured yield in option Extended before sowing); YinsEc (average insured yield in option Extended including the complementary insurance ); YinsZ (zonal maximum insurable yield); Ythresh (average insured yield in insurance option Extended including the complementary insurance after subtracting a 30% deductible).Authors' contributions: Conception or design; acquisition, analysis, or interpretation of data; drafting of the manuscript: ACV. Statistical analysis: AS. Coordinated the research project: MIM. Critical revision of the manuscript for important intellectual content, supervising the work: AG.Citation: Castañeda-Vera, A.; Saa-Requejo, A.; Mínguez, I.; Garrido, A. (2017). Crop insurance demand in wheat production: focusing on yield gaps and asymmetric information. Spanish Journal of Agricultural Research, Volume 15, Issue 4, e0119. https://doi.

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