Crop Insurance Reconsidered

During the late 1980s and early 1990s, there was much debate over how to fix what were perceived as the failures of the Federal crop insurance program. The perceived failures of crop insurance were many. Now, fifteen years and two reform bills later, the crop insurance program boasts an 80% particip...

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Bibliographic Details
Published in:American journal of agricultural economics 2004-12, Vol.86 (5), p.1179-1195
Main Author: Glauber, Joseph W.
Format: Article
Language:English
Subjects:
Adverse selection
Agricultural economics
Agricultural production
Agricultural subsidies
Costs
Crop economics
Crop insurance
Crops
Economic losses
Economic theory
Enrollments
Federal legislation
G220
Homeowners insurance
Insurance
Insurance coverage
Insurance premiums
Insurance underwriting
Legislation
Moral hazard
Participation
Q180
Reforms
Risk management
Risk sharing
Studies
Subsidies
U.S.A
Underwriting
Waugh Lecture
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Summary:During the late 1980s and early 1990s, there was much debate over how to fix what were perceived as the failures of the Federal crop insurance program. The perceived failures of crop insurance were many. Now, fifteen years and two reform bills later, the crop insurance program boasts an 80% participation rate with over 215 million acres enrolled and a total liability estimated in excess of $46 billion for 2004. The crop insurance program and the problems of agricultural insurance more generally are reconsidered. The demand for crop insurance and why participation in the crop insurance program has depended on large subsidies is examined. The problems of rating agricultural production risks and how subsidies mask actuarial performance are examined. The role of the private sector in program delivery and risk sharing are examined. The unintended effects of subsidized crop insurance on production are considered. Alternatives means to manage production risks, including area yield options and weather derivatives, are examined.
ISSN:0002-9092
1467-8276
DOI:10.1111/j.0002-9092.2004.00663.x