Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach

Shaik, Saleem; Coble, Keith H.; Knight, Thomas O.; Baquet, Alan E.; Patrick, George F.

doi:10.1017/s1074070800002303

Cited by 52 publications

(50 citation statements)

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“…More recent studies have begun to analyze the choices made among crop insurance products and coverage levels (Makki and Somwaru, 2001;Changnon, 2002;Barry et al, 2002;Serra et al, 2003;Claassen et al, 2005;Babcock and Hart, 2005;Shaik et al, 2005). Determining which factors most influence farmers' crop insurance purchase decisions can be instrumental in helping the federal government and the crop insurance industry design a more effective program.…”

Section: Introductionmentioning

confidence: 99%

Factors affecting crop insurance purchase decisions by farmers in northern Illinois

Ginder¹,

Spaulding

Tudor

et al. 2009

Agricultural Finance Review

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Purpose -The purpose of this paper is to determine which factors are most influential to farmers' crop insurance purchasing decisions in northern Illinois. Design/methodology/approach -A mail survey method was used to collect information from farmers in a 42 county region of Illinois. Findings -Of the factors analyzed, price had the most significant effect on crop insurance purchase decisions. While acres farmed had statistically significant impact on most of the crop insurance purchase decisions, different factors played a role in purchase decisions based on types of insurance and types of crops covered.Research limitations/implications -The results of this study warrant additional research relative to crop insurance purchase decisions. Analyzing the affect of varying degrees of government subsidization across crop insurance plans and coverage levels on purchase decisions is recommended. Questions regarding the relationship between crop insurance subsidization, farm program payments, and ad hoc disaster payments would be relevant in light of World Trade Organization and federal budget discussions. Also, asking participants to indicate if they have a written grain marketing plan and if that plan leverages crop insurance coverage to support forward contracting or pre-harvest pricing would provide additional insights in determining how crop insurance purchase decisions are made. Questions regarding the claims process should be incorporated into future studies on this topic. The timeliness of claims payments, as well as the farmer's level of satisfaction with the claims adjustor and claims process may factor into the decision-making process. Practical implications -Illinois farmers and crop insurance agencies could benefit from this study. Findings could improve the crop insurance products and services available to Illinois farmers and make the federal crop insurance program more effective in enhancing farmers' ability to manage crop production risk. Originality/value -This paper identified the factors that are most influential to farmers' crop insurance purchasing decisions in northern Illinois.

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Section: Introductionmentioning

confidence: 99%

Factors affecting crop insurance purchase decisions by farmers in northern Illinois

Ginder¹,

Spaulding

Tudor

et al. 2009

Agricultural Finance Review

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“…This result can also be the other way round: increasing insurance demand might help decreasing asymmetric information as the probability of participation of less risky producers increases, mitigating adverse selection (Shaik et al, 2008). Concurrently, efforts towards decreasing asymmetric information might be expected to enhance crop insurance demand; the lower the asymmetric information, the less biased the available data for insurance parameter calibration.…”

Section: Wheat Insurance Demand Modelsmentioning

confidence: 97%

“…Understanding factors driving farmers' insurance demand is fundamental to evaluate the system sustainability and to orient measures towards increasing farmers' insurance adoption (Shaik et al, 2008). The body of literature on crop insurance demand is vast.…”

Section: Agricultural Insurance System Sustainability and Risk Predicmentioning

confidence: 99%

“…Also, research on risk management tools demand has looked at aspects as public incentives through subsidies or the presence of adverse selection (e.g. Donoghue, 2014;Garrido and Zilberman, 2008a;Santeramo et al, 2016;Shaik et al, 2008). Farmers' willingness to adopt such instruments, either by contracting them or by meeting cross-compliance to be beneficiaries, is relevant for policymakers to design requirements and conditions of these instruments.…”

Section: Introductionmentioning

confidence: 99%

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Agricultural insurance policies in Spain and the EU: an analysis of existent and new risk management tools focusing on indirect risk assessment, and asymmetric information

Vera¹

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“…This suggests that, in regions with lower asymmetric information and better adjusted insurance parameters, farmers have a higher tendency to contract insurance, and to do it under a wider coverage (option Extended). But the causality reversed: increasing insurance demand might help decreasing asymmetric information as the probability of participation of less risky producers increases, mitigating adverse selection (Shaik et al, 2008). Properly calibrated insurance parameters would make insuring more attractive to a higher number of farmers.…”

Section: Insurance Demand Yield Gaps and Asymmetric Informationmentioning

confidence: 99%

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

Castañeda-Vera¹,

Saá-Requejo

Mínguez³

et al. 2018

Span. j. agric. res.

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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.

show abstract

Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach

Cited by 52 publications

References 16 publications

Factors affecting crop insurance purchase decisions by farmers in northern Illinois

Factors affecting crop insurance purchase decisions by farmers in northern Illinois

Agricultural insurance policies in Spain and the EU: an analysis of existent and new risk management tools focusing on indirect risk assessment, and asymmetric information

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

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