Latest News on Crop Insurance : Oct 2021

Area-Yield Crop Insurance Reconsidered

One of the more promising proposals for reforming the federal crop insurance program calls for both premium rates and indemnities to be based not on the producer’s individual yield but rather on the aggregate yield of a surrounding area. Area-yield crop insurance can provide more effective yield-loss coverage than individually tailored insurance, without most of the adverse selection and moral hazard problems that have historically undermined the actuarial performance of the federal crop insurance program.[1]

Factors Influencing Farmers’ Crop Insurance Decisions

Farmers’ decisions to purchase crop insurance and their choices among alternative products are analyzed using a two-stage estimation procedure. The influences of risk perceptions, competing risk management options, as well structural and demographic differences are evaluated. The likelihood for crop insurance usage is found to be higher for larger, older, less tenured, more highly leveraged farms, and by those with higher perceived yield risks. The marginal effects of size, age, perceived yield risk, perceived importance of risk management activities, and other structural and demographic variables are identified in terms of their influences on choices among alternative crop insurance products.[2]

Crop Insurance, Moral Hazard, and Agricultural Chemical Use

This study examines the relationship between chemical input use and crop insurance purchase decisions for a sample of Kansas dryland wheat farmers. Recent research by Horowitz and Lichtenberg indicated that, contrary to conventional wisdom, farmers that purchased insurance tended to use relatively more chemical inputs than farmers who did not insure. In contrast, our results confirm the conventional view that moral hazard incentives lead insured farmers to use fewer chemical inputs. Implications for the joint determination of insurance and input use decisions and appropriate estimation techniques are discussed.[3]

Factors Affecting Awareness Level of Farmers about Crop Insurance: A Case Study of Haryana

Dependency of Indian agriculture is still continuing on monsoon. The unpredictable and irregular distribution of monsoon rains increases risk and uncertainty farmers. Spreading the risk is an important aspect of decision making to farmers. For the improvement in the handling of perilous outcomes across individuals, there is a need for contingent plans. So, to be aware and to understand the importance of crop insurance and the related policies has become necessary for the farmers of Haryana. We have tried to know the stage of their awareness about crop insurance through this study.  The main objective of the study is to trace out the awareness level of farmers about crop insurance in Haryana and which are the main factor that affect their awareness level. The present study finds that there are so many socio-economic factors which affect the knowledge of farmers about crop insurance like age, education, sources of major income, category of farming, income level and experience of farming. Education plays major role in understanding policies and importance of insurance for the farmers. Both the government and the implementing agency in the area should initiate awareness campaign in order to increase the level of farmers. Awareness campaign should be conducted by the government from time to time at the village level to enhance the awareness level of farmers. The study suggests that the knowledge level of farmers about crop insurance and its schemes can be increased by using different platforms of spreading awareness through various educational efforts.[4]

Poultry Farms Risk Management by Insurance: Evidence from Ghana

This study assessed poultry farmers’ decision to pay for poultry insurance in the Dormaa Municipality of Ghana, from a random sample of 100 commercial chicken producers. The paper employed the Contingent Valuation and Tobit models. The results showed that 72% of farmers are willing to pay GHS 31.00 or 3.10% on average of the chicken value of GHS 1000.00 ($263.52) to insure. Poultry farmers with multiple income sources tend to substitute insurance for other forms of occupation. The study found risk influence producers decision to insure because they have moderate frequency and impact.  Prior experience with insurance, severity of disease serve as incentives for insurance and age serve as disincentive for agricultural insurance which require capacity building programmes to strengthen farmers demand for insurance whilst insurers take advantage of this potential market to sell viable insurance products. [5]          

[1] Miranda, M.J., 1991. Area‐yield crop insurance reconsidered. American Journal of Agricultural Economics, 73(2), pp.233-242.

[2] Sherrick, B.J., Barry, P.J., Ellinger, P.N. and Schnitkey, G.D., 2004. Factors influencing farmers’ crop insurance decisions. American journal of agricultural economics, pp.103-114.

[3] Smith, V.H. and Goodwin, B.K., 1996. Crop insurance, moral hazard, and agricultural chemical use. American Journal of Agricultural Economics, 78(2), pp.428-438.

[4] Duhan, A. and Singh, S., 2017. Factors affecting awareness level of farmers about crop insurance: A case study of Haryana. Asian Journal of Agricultural Extension, Economics & Sociology, pp.1-7.

[5] Adjei, C., Amagashie, D.P.K., Anim-Somuah, H. and Oppong, B.A., 2016. Poultry farms risk management by insurance: evidence from Ghana. Journal of Economics, Management and Trade, pp.1-8.

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