Farmers’ responses to the changes in Hungarian agricultural insurance system

Abstract

Purpose The purpose of this paper is to investigate the role of crop insurance among Hungarian crop farmers and the responses to the introduction of the two-scheme risk management system. Specifically, first, it examines the economic and environmental factors affecting the willingness of farmers to contract crop insurance. Second, it reveals the relationship between having crop insurance and technical efficiency of crop producing farms. Design/methodology/approach Probit models of panel data are applied to explore the factors of insurance decisions. The relationship between efficiency and insurance is investigated with two-stage data envelopment analysis (DEA) model with double bootstrap using panel data for the 2001 to 2014 period. Findings The results of Probit model estimations show that the education, the size, the indebtedness of crop producing farms and the new two-scheme risk management system are in positive correlation, while the concentration of farming activity are in negative correlation with the crop insurance contracting. The estimations of two-stage DEA model reveal that crop producing farms with an agricultural insurance contract are more efficient than the farmers without using this risk management tool. Originality/value Empirical investigation of the influencing factors of agricultural insurance demand in Hungary and the examination of the relationship between insurance and technical efficiency may contribute to the development of Hungarian risk management system.

Determinants of agricultural insurance adoption: evidence from farmers in the state of São Paulo, Brazil

“…The marginal effect of the variable, calculated for the sample average, shows that having a higher education increases by roughly 12% the probability of adopting rural insurance, ceteris paribus. This result is in line with recent literature on the topicfor instance with studies by Fahad et al (2018), Zubor-Nemes et al (2018, Li et al (2017) and Velandia et al (2009). When producers have a higher education, they possess a greater capacity for understanding the functioning of the insurance market, the procedures necessary for accessing insurance and the importance of managing production risk.…”

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).…”

“…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.…”

Technological Differences, Theoretical Consistency, and Technical Efficiency: The Case of Hungarian Crop-Producing Farms

“…Earlier studies using traditional SFA method reported technical efficiency score in Hungarian crop producing sector around 0.73 [14,38] studies used DEA reported around 0.5-0.6 [39,40]. Baráth and Fertő [14] using an LCM showed that when technological heterogeneity is considered the technical efficiency is higher 0.83.…”