Factors differentiating the level of crop insurance at Polish farms

Abstract

Purpose The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland. Design/methodology/approach To examine the determinants of decisions regarding crop insurance, the authors used logistic regression. The base source of data for the analysis was the 2013 FADN sample. The scale of yield losses, the indemnities received and the Arrow-Pratt risk aversion coefficient were examined in a representative sample of farms in consecutive years in the period 2004-2013. Findings Losses are the major determinants of crop insurance uptake. Additionally, it was observed that the economic determinants are in line with the expected utility theory, while contrary to expectations, farmer’s characteristics such as education level, age or even risk aversion did not prove to have any influence on crop insurance uptake. Research limitations/implications The FADN sample is representative as regards the type of farming, economic size of farm and location of the farm. Every farm in the sample represents a specific number of similar farms in the population. However, it must be emphasised that the representativeness of the sample with respect to other determinants, e.g., yield losses in previous years, using crop insurance or the farmers’ age and education has not been verified due to lack of data characterizing the general population with regard to these factors. Practical implications It could be argued that the system of crop insurance subsidies should be targeted to encourage the farmers who previously had not used insurance to join the system. Originality/value The paper presents the analysis of crop insurance uptake in a country with a strongly polarised agriculture. The Polish farm sector consists of 1.4 million farms with sizes ranging from 1 ha to over a few thousands hectares. The research is based on a data set of 5,202 farms which contains data from ten years (2004-2013). The novelty of the methodological approach is that it includes information on the number of farms represented by every farm in the FADN sample in the Horvitz-Thompson estimator in order to achieve results which are valid for the general population of Polish farms.

Prospects for agricultural insurance in Europe

“…Variation in the adoption of crop insurance across EU member states can be partly explained by cultural and historic differences. For instance, in Hungary and Poland, crop insurance is partly obligatory, as described by Zubor-Nemes et al (2018) and Wąs and Kobus (2018), respectively. Hungarian farmers are obliged to buy insurance if their farm is larger than 10 ha (arable farms) or 5 ha (vegetable farms).…”

“…margin insurance and price contracts) and the role of advisory services (Santeramo et al, 2018;Trestini et al, 2018;Wąs and Kobus, 2018);…”

“…two case studies are from the north-western region (the Netherlands; Van Asseldonk et al, 2018;and Germany;Schulte and Musshof, 2018), two from the eastern region, i.e. Poland (Wąs and Kobus, 2018) and Hungary (Zubor-Nemes et al, 2018), and three are from the mid-and southern part of the EU, including Austria (Url et al, 2018) and Italy (Santeramo et al, 2018;Trestini et al, 2018).…”

“…They elaborate on the effect of previous loss experience on adoption of insurance (Wąs and Kobus, 2018;Santeramo et al, 2018), implications of insurance for technical efficiency (Zubor-Nemes et al, 2018), and crowding out of private market insurance by supported insurance schemes (Van Asseldonk et al, 2018). Url et al (2018) andvon Negenborn et al (2018) explore margin insurance and weather index insurance, respectively.…”

Post-Adversities Recovery and Profitability: The Case of Italian Farmers

“…The farmers’ perspectives in using insurance instruments are connected to their experiences, i.e. previous receipt of indemnity or significance yield losses in the past [60].…”