Crop Insurance, Premium Subsidy and Agricultural Output

This paper studied the effects of crop insurance on agricultural output with an economic growth model. Based on Ramsey-Cass-Koopmans （RCK） model, a basic model of agriculture economic growth was developed. Extending the basic model to incorporate uncertainty and insurance mechanism, a risk model and a risk-insurance model were built to study the inlfuences of risk and crop insurance on agricultural output. Compared with the steady states of the three models, the following results are achieved：（i） agricultural output decreases if we introduce uncertainty into the risk-free model;（ii） crop insurance promotes agriculture economic growth if insurance mechanism is introduced into the risk model;（iii） premium subsidy constantly improves agricultural output. Our contribution is that we studied the effects of crop insurance and premium subsidy from the perspective of economic growth in a dynamic framework, and proved the output promotion of crop insurance theoretically.

Farmers' Perception and Awareness and Factors Affecting Awareness of Farmers Regarding Crop Insurance as a Risk Coping Mechanism Evidence from Pakistan

This study has been conducted in three districts of Punjab Province namely, Dera Ghazi Khan, Rajan Pur and Bahawalpur of Pakistan. The study showed the results of a survey of 300 farmers which was organized to assess awareness level of farmers regarding crop insurance, factors affecting the awareness level among farmers and the perception of farmers about crop insurance. Based on exploratory research work upon the responses of farmers, the average and standard deviation were calculated. Probit model was applied to explore the factors affecting the awareness level of farmers. SPSS was used for the analysis of the collected data. The results revealed that out of 300 farmers, 184 farmers were aware with crop insurance and rests of the 116 farmers were not aware. Banks and E-media were found to be the two most important sources of the awareness for the respondent farmers. In the study area, the climatic risks were reported as the most severe risks faced by the farmers. The results also revealed the existence of negative perceptions of the farmers about crop insurance i.e. farmers perceived crop insurance as a kind of tax and they believed premium was so high that it was out of range of poor farmers and only large scale farmers could afford it. Results obtained by applying Probit model revealed that ＂education＂ and ＂previously availed agricultural credit＂ were the two most important factors which affected the awareness of the farmers regarding crop insurance.

Is the “One Province One Rate” premium policy reasonable for Chinese crop insurance? The case in Jilin Province

Crop insurance in China is currently adopting the premium pricing strategy of "One Province One Rate", which appears to be in line with the systematic risk characteristics within crop insurance. This research aims to investigate the theoretical rationalization of this pricing strategy and its implications using the spatial lag model and the county-level data from the 45 corn plant counties of Jilin Province, China. Results corroborate that:(1) the spatial spillover effect of the corn yield risk is significant in Jilin but decreases rapidly when the risk unit includes more than eight counties; and(2) separating Jilin Province into eight risk zones for corn insurance will significantly reduce the high cross-subsidy phenomenon arising from the "One Province One Rate" strategy and shall benefit poor peasants in the region as well. This paper not only proves the existence of a systematic risk of crop insurance but also reveals that the spatial correlation and systemic features of the crop yield risk do not create a solid foundation for the current pricing strategy of "One Province One Rate". These conclusions will undoubtedly provide important references and empirical evidence for the role of China’s crop insurance in poverty alleviation.

Is the crop insurance program effective in China? Evidence from farmers analysis in five provinces

This paper aims to evaluate the effectiveness of the Chinese crop insurance program in terms of farmers＇ utility and welfare. A simulation model based on the power utility function was first developed to evaluate the effectiveness of crop insurance. Then, the Monte Carlo approach was used to generate the datasets of area, price, yield, cost, and income based on the characteristics of representative farmers, which were clustered and calibrated using the farm-level data of 574 individual farmers from five Chinese provinces. Finally, the effectiveness of Chinese crop insurance was evaluated by comparing the certainty equivalence（CE） of farmers＇ utility/welfare under alternative crop insurance scenarios. Government subsidy is a necessary premise for implementing the crop insurance program. The government should subsidize more than 50% of the crop insurance premium to motivate more farmers to participate in the program. The findings also show that the current crop insurance program in China has increased the farmers＇ welfare but still need to be improved to achieve the Pareto improvement and to make full use of the financial fund of the government. This paper is believed to not only extend academic research but also has significant implications for policymakers, especially in the context of rapid development of Chinese crop insurance with much issues such as rate, subsidy and coverage level needed to be improved.

A test on adverse selection of farmers in crop insurance:Results from Inner Mongolia,China

Adverse selection is an operating risk of crop insurance. Based on survey data on crop insurance collected by questionnaires in Inner Mongolia, China, the paper uses non-parametric analysis and econometric models to estimate the relationship between conditions for crop production and farmers＇ insurance decision in order to test the existence of farmers＇ adverse selection. The results show farmers＇ adverse selection does exist, but settling a claim by negotiation and premium subsidy from governments at all levels can defuse farmers＇ adverse selection under the current system of crop insurance. Risk regionalization, heterogeneous insurance contract and product innovation may decrease adverse selection to some extent.

Empirical study on optimal reinsurance for crop insurance in China from an insurer's perspective

This study investigates the optimal reinsurance for crop insurance in China in an insurer＇s perspective using the data from Inner Mongolia, Jilin, and Liaoning, China. On the basis of the loss ratio distributions modeled by An Hua Crop Risk Evaluation System, we use the empirical model developed by Tan and Weng（2014） to study the optimal reinsurance design for crop insurance in China. We find that, when the primary insurer＇s loss function, the principle of the reinsurance premium calculation, and the risk measure are given, the level of risk tolerance of the primary insurer, the safety loading coefficient of the reinsurer, and the constraint on reinsurance premium budget affect the optimal reinsurance design. When a strict constraint on reinsurance premium budget is implemented, which often occurs in reality, the limited stop loss reinsurance is optimal, consistent with the common practice in reality. This study provides suggestions for decision making regarding the crop reinsurance in China. It also provides empirical evidence for the literature on optimal reinsurance from the insurance market of China. This evidence undoubtedly has an important practical significance for the development of China＇s crop insurance.

Factors Hindering Pakistani Farmers' Choices Towards Adoption of Crop Insurance

This study was conducted to analyze the factors that negatively influence Pakistani farmers＇ willingness to participate in crop insurance. Probit model was applied to identify the significant factors which influenced our dependent variable ＂not willing to participate＂. The results of the analyses showed that crop insurance premium was the most influencing factor which had positive and significant impact on dependent variable. Similarly dissatisfaction with crop loan insurance scheme, lacking of knowledge about crop insurance, believing of being against Islamic rules and time taking process was also found to be positive and significantly influenced the dependent variable. While limited decision power and limited perils were not found to be significant in the results.

The Mathematical Analysis on the Risk Management Effect of Crop Insurance Plan

As a variant index, variation has an inherent shortcoming that it can only reflect the static fluctuation of the crop. This paper makes complementary analysis about it on the basis of the comment on Miranda＇s approach of β index and goes on to analyze the β index approach under the condition of three kinds of crop insurance plans, β index approach has the advantage that it can dynamically reflect the risk transfer effect of crop insurance plan. At the same insurance level, the smaller the β index is, the better the corresponding risk transfer effect of crop insurance plan is; And vice versa.

Crop Insurance Premium Ratemaking Based on Survey Data:A Case Study from Dingxing County, China

Premium ratemaking is an important issue to guarantee insurance balance of payments. Most ratemaking methods require large samples of long-term loss data or farm-level yield data, which are often unavailable in developing countries. This study develops a crop insurance ratemaking method with survey data. The method involves a questionnaire survey on characteristic yield information(average yield, high yield, and low yield) of farming households’ cropland. After compensating for random error, the probability distributions of farm-level yields are simulated with characteristic yields based on the linear additive model. The premium rate is calculated based on Monte Carlo yield simulation results. This method was applied to Dingxing County, North China to arrive at the insurance loss cost ratio and calculate the necessary premium rate. The method proposed in this study could serve as a feasible technique for crop insurance ratemaking inregions that lack sufficient long-term yield data, especially in developing countries with smallholder agriculture.

Risk preferences and the low-carbon agricultural technology adoption:Evidence from rice production in China

Climate change which is mainly caused by carbon emissions is a global problem affecting the economic development and well-being of human society.Low-carbon agriculture is of particular significance in slowing down global warming and reaching the goal of“carbon peak and carbon neutrality”.Therefore,taking straw incorporation as an example,this paper aims to investigate the impact of risk preferences on farmers’low-carbon agricultural technology(LCAT)adoption.Based on a two-phase micro-survey data of 1038 rice farmers in Jiangsu,Jiangxi,and Hunan provinces,this paper uses experimental economics methods to measure farmers’risk aversion and loss aversion to obtain the real risk preferences information of the farmers.We also explore the data to examine the actual LCAT adoption behavior of farmers.The results revealed that both risk aversion and loss aversion significantly inhibit farmers’LCAT adoption:more risk-averse or more loss-averse farmers are less likely to adopt LCAT.It is further found that crop insurance,farm scale and governmental regulations can alleviate the negative impact of risk aversion and loss aversion on farmers’LCAT adoption.Therefore,we propose that local governments need to promote low-carbon agricultural development by propagating the benefits of LCAT,extending crop insurance,promoting appropriate scale operations,and strengthening governmental regulations to promote farmers’LCAT adoption.

Performance of Temperature-Related Weather Index for Agricultural Insurance of Three Main Crops in China

In this study, two categories of weather index—absolute index and relative index—for chilling injury and heat damage of three main crops in China were assessed to identify insurable counties. First, correlations between selected weather indices and yield losses were examined for each county. If a correlation was significant, the county was categorized as ‘‘insurable'' for the corresponding hazard or index. Second, the spatial distribution of insurable counties was characterized and finally, their correlation coefficients were analyzed at various spatial scales.The results show that the spatial patterns of insurable areas varied by categories of weather indices, crops, and hazards.Moreover, the weather indices based on relative threshold of temperature were more suitable for chilling injury in most regions, whereas the indices based on absolute threshold were more suitable for heat damage. The findings could help the Chinese government and insurance companies to design effective insurance products.

The impact of farmers’ assessments of risk management strategies on their adoption willingness

Farmers'assessments of risk management strategies and how the assessments influence their willingness to adopt these strategies are poorly understood.This study conducts a structured survey of 469 farmers to investigate how farmers assess both crop insurance and crop price insurance,the impact of the assessments on their adoption willingness,and in particular,the differences in assessments and adoption willingness between crop insurance and crop price insurance.Empirical results show that farmers’assessments on crop insurance can be significantly improved through communication and experience.The most effective way to improve farmers'assessments on crop price insurance is providing adequate information about the insurance products.Furthermore,farmers'adoption willingness would be enhanced by improved assessment of both crop yield and crop price insurance.This study provides the first empirical evidence that farmers have limited information to assess insurance,which significantly influences their willingness to adopt.This finding reflects that the dissemination of insurance policies,the effectiveness of insurance,and the availability of insurance services significantly enable farmers'ability to assess risk management strategies,which potentially increases farmers'willingness to adopt insurance.

Understanding Farmers’ Preferences Towards Insurance Schemes that Promote Biosecurity Best Management Practices

Plant pest and disease outbreaks,which occur with increasing frequency and intensity,cause catastrophic losses and threaten food security in many areas around the world.These impacts are expected to be exacerbated by climate change.Tackling this challenge requires mechanisms that ensure the financial security of farmers while incentivizing private biosecurity efforts to prevent future outbreaks.This study explored crop producers’ preferences for a subsidized insurance scheme as an instrument to manage novel biotic risks.Specific ally,we developed a choice experiment to evaluate Spanish growers’ willingness to pay for a crop insurance product that promotes compliance with best biosecurity management practices.Our results show that while growers are willing to pay more for high coverage products that increase the resilience of crops to potential catastrophic outbreaks,there is neither a strong demand nor widespread availability of such tools.Farmers required reductions in premiums before undertaking risk prevention measures;they are more willing to pay for schemes that link their eligibility to access to ad hoc funds in the eventuality of a catastrophic outbreak than they are to purchase insurance.Our findings also suggest that Spanish growers prefer expanding the eligible risks covered by insurance and envisage a role for insurance in offering biosecurity protection.