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Developing Experience-Based Premium Rate Discounts in Crop Insurance
Roderick M. Rejesus, Keith H. Coble, Thomas O. Knight and Yufei Jin
American Journal of Agricultural Economics
Vol. 88, No. 2 (May, 2006), pp. 409-419
Stable URL: http://www.jstor.org/stable/3697731
Page Count: 11
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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).
American Journal of Agricultural Economics © 2006 Agricultural & Applied Economics Association