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Can Crop Insurance Premiums Be Reliably Estimated? AgEcon
Ramirez, Octavio A.; Carpio, Carlos E.; Rejesus, Roderick M..
This paper develops and applies a methodology to assess the accuracy of historical loss-cost rating procedures, similar to those used by the U.S. Department of Agriculture’s Risk Management Agency (RMA), versus alternative parametric premium estimation methods. It finds that the accuracy of loss-cost procedures leaves much to be desired, but can be markedly improved through the use of alternative methods and increased farm-level yield sample sizes. Evidence suggests that the high degree of inaccuracy in crop insurance premium estimations through historical loss-cost procedures identified in the paper might be a major factor behind the need for substantial government subsidies to keep the program solvent.
Tipo: Journal Article Palavras-chave: Agricultural subsidies; Crop insurance premium estimation; Loss-cost procedures; Risk Management Agency; Agricultural and Food Policy; Agricultural Finance; Farm Management; Risk and Uncertainty.
Ano: 2011 URL: http://purl.umn.edu/107091
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Actuarial Impacts of Loss Cost Ratio Ratemaking in U.S. Crop Insurance Programs AgEcon
Woodard, Joshua D.; Sherrick, Bruce J.; Schnitkey, Gary D..
This study examines the actuarial implications of the loss cost ratio (LCR) ratemaking methodology employed by the Risk Management Agency as a component of base rates for U.S. crop insurance programs, and identifies specific conditions required for the LCR methodology to result in unbiased rates when liabilities trend. Specifically, constant relative yield risk resulting in growing absolute variance through time and other restrictive requirements are required for the LCR to result in unbiased rates. These requirements are tested against a large farm-level data set for Illinois corn. Our findings indicate that the conditions required for appropriate use of the LCR methodology are violated for this high premium volume market, resulting in large implied rate...
Tipo: Journal Article Palavras-chave: Actuarially fair; Crop insurance; Insurance rating; Loss cost ratio; Risk growth; Risk Management Agency; Yield trends; Crop Production/Industries; Risk and Uncertainty.
Ano: 2011 URL: http://purl.umn.edu/105550
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Premium Estimation Inaccuracy and the Actuarial Performance of the US Crop Insurance Program AgEcon
Ramirez, Octavio A.; Carpio, Carlos E..
This article explores the impact of the likely levels of inaccuracy associated with two main types of premium estimation methods, under different sample sizes, on the actuarial performance of the US crop insurance program. The analyses are conducted under several plausible assumptions about the insurer versus the producers’ estimates for their actuarially fair premiums. Significant differences are found due to estimation method and sample size, with the currently used procedures resulting in the worse actuarial performance. Several conclusions and recommendations are provided that could markedly reduce the amount of public subsidies needed to keep this program solvent.
Tipo: Conference Paper or Presentation Palavras-chave: Agricultural Subsidies; Crop Insurance Premium Estimation; Loss-Cost Procedures; Risk Management Agency; Financial Economics.
Ano: 2011 URL: http://purl.umn.edu/102463
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Current Issues in Crop Insurance (PowerPoint) AgEcon
Anderson, Richard.
Tipo: Conference Paper or Presentation Palavras-chave: Crop insurance; Risk; Risk Management Agency; Risk and Uncertainty; D81.
Ano: 2009 URL: http://purl.umn.edu/48909
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