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Agricultural Economics

Iowa State University

Crop insurance

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Full-Text Articles in Insurance

Price Analysis, Risk Assessment, And Insurance For Organic Crops, Ariel Singerman, Chad E. Hart, Sergio H. Lence Aug 2011

Price Analysis, Risk Assessment, And Insurance For Organic Crops, Ariel Singerman, Chad E. Hart, Sergio H. Lence

CARD Policy Briefs

In recent years, the organic sector has grown steadily and significantly. However, little economic research has been performed on risk management in organic agriculture, likely because of the lack of available data. This lack of data may also be why the creation of the current crop insurance policy for organic farmers has been so ad hoc.

The Agricultural Risk Protection Act of 2000 recognized organic farming as a “good farming practice,” making federal crop insurance coverage available for organic crops, and taking into account the idiosyncrasies of the organic production system. In addition to the production risks covered for conventional ...


Time To Revisit Crop Insurance Premium Subsidies?, Bruce A. Babcock Mar 2011

Time To Revisit Crop Insurance Premium Subsidies?, Bruce A. Babcock

CARD Policy Briefs

In 2000, Congress decided to move away from a fixed-dollar-per-acre premium subsidy to a subsidy percentage that applies to any crop insurance product offered. This change reduced the cost to farmers of moving from yield insurance to revenue insurance by more than 50%. In addition, Congress decided to pay a large proportion of the additional premium for higher coverage levels, paying for more than half the cost of moving from the 65% to the 75% coverage level and about 25% of the additional cost of moving from 75% to 80% coverage. Not surprisingly, farmers responded to these lower costs by ...


Costs And Benefits Of Moving To A County Acre Program, Bruce A. Babcock May 2010

Costs And Benefits Of Moving To A County Acre Program, Bruce A. Babcock

CARD Policy Briefs

Better integration of the different programs that comprise the farm safety net seems inevitable in the next farm bill given widespread public concern over the rapidly growing federal debt. With $5 billion in direct payments flowing annually to farmers who own or rent base acres without regard to farm income, $7 billion flowing to crop insurance companies over the last two years, and $2.6 billion flowing to cotton farmers in the last two years from programs that violate our trade commitments, there is substantial room for improvement. One path toward better integration would be to modify the ACRE (Average ...


Using A Farmer's Beta For Improved Estimation Of Expected Yields, Miguel A. Carriquiry, Bruce Babcock, Chad E. Hart Apr 2008

Using A Farmer's Beta For Improved Estimation Of Expected Yields, Miguel A. Carriquiry, Bruce Babcock, Chad E. Hart

Economics Publications

Effects of sampling error in estimation of farmers' mean yields for crop insurance purposes and their implications for actuarial soundness are explored using farm- level corn yield data in Iowa. Results indicate that sampling error, combined with nonlinearities in the indemnity function, leads to empirically estimated insurance rates that exceed actuarially fair values. The difference depends on the coverage level, the number of observations used, and the participation strategy followed by farmers. A new estimator for mean yields based on the decomposition of farm yields into systemic and idiosyncratic components is proposed, which could lead to improved rate-making and reduce ...


Crop Insurance Rates And The Laws Of Probability, Bruce A. Babcock, Chad E. Hart, Dermot J. Hayes Apr 2002

Crop Insurance Rates And The Laws Of Probability, Bruce A. Babcock, Chad E. Hart, Dermot J. Hayes

CARD Working Papers

Increased crop insurance subsidies have increased the demand for insurance at coverage levels higher than the traditional level of 65 percent. Premium rates for higher levels of yield insurance under the Federal Actual Production History (APH) program equal the premium rate at the 65 percent coverage level multiplied by a rate relativity factor that varies by coverage level but not by crop or region. In this paper, we examine the consistency of these constant rate relativity factors with the laws of probability by determining the maximum 65 percent premium rate that is consistent with a well-defined yield distribution. We find ...