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Economic Considerations in Crop Insurance

Author

Listed:
  • Bailey, Warren R.
  • Jones, Lawrence A.

Abstract

This report traces the evolution of crop-hail and all-risk crop insurance. It describes the present use of each kind of insurance among crops, States, and regions in terms of coverage, premiums paid, and indemnities. It compares and contrasts the kinds of insurance and their inherent differences. The different natural hazards to growing crops are listed and concepts of crop yield variability, the sources of variability, and the impact of production technology are discussed. Analyses are made of the relation of coverage to indemnities and premiums on individual farm contracts, and how they differ under conditions of high or moderate yield variability. The report discusses the problem of adverse insurance risks, and illustrates the use of normal distribution theory and statistical procedures in projecting probable indemnities in all-risk crop insurance. It analyzes the influence of the level of yield guarantee and the "shape" of the yield distribution on probable indemnities. The question of the financial reserves that may be needed by the insurer is examined.

Suggested Citation

  • Bailey, Warren R. & Jones, Lawrence A., 1970. "Economic Considerations in Crop Insurance," Miscellaneous Publications 322817, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersmp:322817
    DOI: 10.22004/ag.econ.322817
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    File URL: https://ageconsearch.umn.edu/record/322817/files/ERS-447.pdf
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    Cited by:

    1. Heid, Walter G., Jr., 1979. "U.S. Wheat Industry," Agricultural Economic Reports 305701, United States Department of Agriculture, Economic Research Service.
    2. Lanier, Eleanor B., 1972. "Economics of Agriculture: Reports and Publications Issued or Sponsored by USDA's Economic Research Service, July 1970-June 1971," Miscellaneous Publications 321803, United States Department of Agriculture, Economic Research Service.

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