Developing Experience-Based Premium Rate Discounts in Crop Insurance

Posted: 8 May 2006

See all articles by Roderick M. Rejesus

Roderick M. Rejesus

North Carolina State University

Keith H. Coble

Mississippi State University - Department of Agricultural Economics

Thomas Knight

Texas Tech University - College of Agricultural Sciences and Natural Resources

Yufei Jin

AGRICORP

Abstract

This article addresses the feasibility of implementing an experience-based premium rate discount system in crop insurance. While adverse selection and moral hazard in crop insurance have been extensively studied in the past, discount systems or bonus-malus incentives have not, to our knowledge, been investigated. Our empirical analysis indicates that a crop insurance discount system could be implemented based on a measure of favorable past insurance experience. The estimated average discounts based on the rating methods developed in this study ranged from 5% to 9% (depending on the crop being considered).

Suggested Citation

Rejesus, Roderick M. and Coble, Keith H. and Knight, Thomas and Jin, Yufei, Developing Experience-Based Premium Rate Discounts in Crop Insurance. American Journal of Agricultural Economics, Vol. 88, No. 2, pp. 409-419, May 2006. Available at SSRN: https://ssrn.com/abstract=896341 or http://dx.doi.org/10.1111/j.1467-8276.2006.00867.x

Roderick M. Rejesus (Contact Author)

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

Keith H. Coble

Mississippi State University - Department of Agricultural Economics ( email )

Box 5187
Mississippi State, MS 39762
United States

Thomas Knight

Texas Tech University - College of Agricultural Sciences and Natural Resources ( email )

Lubbock, TX 79409
United States

Yufei Jin

AGRICORP ( email )

1 Stone Road West
Guelph, Ontario N1H 8M4
Canada

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