An Empirical Analysis of the Demand for Multiple Peril Crop Insurance
1993
Goodwin, Barry K.
Knowledge of factors affecting farmer purchases of crop insurance is essential for evaluating the soundness and profitability of crop insurance programs. Despite this importance, the demand for crop insurance has received limited empirical attention. The present paper reports on an empirical assessment of the demand for crop insurance by Iowa corn producers. Adverse selection in the insured pool suggests that producers with differing levels of loss‐risk have different demand elasticities. Loss‐risk is included in the empirical analysis and is found to influence the elasticity of demand. Results show average demand elasticities of about −0.32 for relative insured acres and −0.73 for liability per planted acre. Implications for the actuarial soundness of the industry are provided.
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