Revisiting the demand for agricultural insurance: the case of Spain

Abstract

We use the actual insurance records of 52,300 farmers and 11 years to estimate two sets of insurance demands. We define measures of insurance's expected returns, variance and third moment, based on observed insurance data, and infer the expected returns for those farmers that have never had an indemnity. We estimate several probit models and count models for the insuring vs non-insuring strategies, in which the economic returns of insurance and its two measures of dispersion enter as explanatory variables. Results show that farmers' insurance strategies are largely explained by their actual insurance experience as captured by these three variables. Individuals with loss rations greater than 1 do not show more responsiveness that those facing more balanced premium charges. Results show that adverse selection may not be a major source of inefficiency in the Spanish insurance system.

Crop insurance demand in wheat production: focusing on yield gaps and asymmetric information

“…Observations are per county and year. Premium subsidies are the most common public intervention to incentive crop insurance demand (Babcock & Hart, 2005;Claassen et al, 2005;Garrido & Zilberman, 2008). In the case of wheat insurance in Castilla y León, and for option Extended (the one with the largest guarantees), most of the insured area was gathered by Module 2, despite subsidies in Module 1 being higher than in Module 2.…”

Coping with price risks on Dutch farms

“…The adoption of price contracts within farms is analysed by counting the number of years that a given farmer decides to underwrite any type of price contract (Garrido and Zilberman, 2008), and subsequently divided by the number of years the farm is in the panel. For example, for the most frequently applied potato price contracts on arable farms, 29% adopted a price contract each year (during the period 2009-2012), while 40 never hedged prices.…”

Agricultural insurance policies in Spain and the EU: an analysis of existent and new risk management tools focusing on indirect risk assessment, and asymmetric information

“…Premium subsidies are the most common public intervention to incentive crop insurance demand (Babcock and Hart, 2005;Claassen et al, 2005;Garrido and Zilberman, 2008b). Garrido and Zilberman (2008) characterized economic factors influencing the demand of agricultural insurance using individual data from farmers insuring their crops in seven counties all along Spain.…”

“…Also, research on risk management tools demand has looked at aspects as public incentives through subsidies or the presence of adverse selection (e.g. Donoghue, 2014;Garrido and Zilberman, 2008a;Santeramo et al, 2016;Shaik et al, 2008). Farmers' willingness to adopt such instruments, either by contracting them or by meeting cross-compliance to be beneficiaries, is relevant for policymakers to design requirements and conditions of these instruments.…”