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Sami Myyrä - One of the best experts on this subject based on the ideXlab platform.
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The Demand For Public-private Crop Insurance And Government Disaster Relief
Journal of Policy Modeling, 2020Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Insurance premium subsidies and disaster relief payments are government actions that can help to smooth farmers’ incomes between years. In the EU Crop Insurance based on public–private partnership is promoted. We present an analysis based on farmers’ stated preferences with split data approach of Crop Insurance and disaster relief provided by the government. Results reveal that farmers’ willingness to pay for Crop Insurance is conditional on the prospect for government disaster relief. Results show that possibility for disaster relief payments will lead to extensive use of taxpayers’ money if Crop Insurance premiums are subsidized.
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The demand for public-private Crop Insurance and government disaster relief
2020Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Insurance premium subsidies and disaster relief payments are government actions that can help to smooth farmers’ incomes between years. In the EU Crop Insurance based on public-private partnership is promoted. We present an analysis based on farmers’ stated preferences with split data approach of Crop Insurance and disaster relief provided by the government. Results reveal that farmers’ willingness to pay for Crop Insurance is conditional on the prospect for government disaster relief.
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Willingness to pay for agricultural Crop Insurance in the northern EU
Agricultural Finance Review, 2014Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Purpose - – The purpose of this paper is to investigate the demand for Crop Insurance. Moreover, farmer willingness to pay (WTP) for Crop Insurance was derived. Factors affecting the demand were also examined in a country where Crop Insurance products are not currently available. Sensitivity analysis was conducted by studying the price-anchoring effect. Design/methodology/approach - – Data from a choice experiment (CE) were analyzed with mixed logit models and the distribution of farmer WTP for Crop Insurance was derived. A split sample approach with varying premium vectors was used to analyze the price-anchoring effect. Findings - – Demand was revealed for Crop Insurance products in Finland. The demand was higher among younger farmers and farms with more arable land. WTP for Crop Insurance products was very sensitive to the premium interval presented in the CE design. Research limitations/implications - – The price-anchoring effect may disrupt the market development of Crop Insurance products, because Insurance companies may take advantage of the lack of awareness among farmers of Crop Insurance pricing. Practical implications - – The Insurance product expected indemnity was a more important factor than the deductible in determining farmer WTP for Crop Insurance. Therefore, the 30 percent deductible level set for subsidized Crop Insurance products is not an obstacle for the development of such products in the EU. Originality/value - – The study applied a well-known method (CE) to Crop Insurance in a country where these products are non-existent. The split sample approach was used to examine the price-anchoring effect on Crop Insurance.
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Government policies in changing climate and the demand for Crop Insurance
2014Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Crop Insurance markets are exposed to unpredictable weather conditions. Yield risks are systemic in nature, and public intervention is often a necessity for the functioning private Crop Insurance markets. Climate change is expected to increase catastrophic weather events and yield volatility. This paper addresses the question how government actions related to extreme weather events affect the demand and farmers willingness to pay for Crop Insurance products. The analysis is based on farmers’ stated preferences with split data approach. Our results reveal that farmers’ willingness to pay for Crop Insurance was different when government disaster relief was possible compared to the situation where disaster relief was not possible. Results show that possibility for disaster relief payments in catastrophic event will lead to extensive misuse of taxpayers’ money if Crop Insurance premiums are subsidized simultaneously.
William M. Edwards - One of the best experts on this subject based on the ideXlab platform.
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Multiple Peril Crop Insurance
2003Co-Authors: William M. Edwards, Donald HofstrandAbstract:Multiple Peril Crop Insurance (MPCI) is a broad-based Crop Insurance program regulated by the U.S. Department of Agriculture and subsidized by the Federal Crop Insurance Corporation(FCIC). Crops eligible for MPCI coverage in Iowa include corn, sobyeans, oats, wheat, seed corn, popcorn, barley, potatoes, sweet corn, canning beans, dry beans, forages, grain sorghum, green peas, tomatoes, and nursery stocks. Not all of these Crops can be insured in all counties.
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Catastrophic Crop Insurance
2003Co-Authors: William M. EdwardsAbstract:Beginning in 1995 farmers were offered the chance to carry a minimum level of Multiple Peril Crop Insurance (MPCI) coverage at very little cost. This catastrophic or CAT Insurance coverage replaces the protection offered to Crop producers under federal disaster programs in recent years.
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Managing Risk with Crop Insurance
1998Co-Authors: William M. EdwardsAbstract:Every year Iowa farmers face the threat of damage to their Crops from drought, hail, flood, insects, and other natural disasters. The U.S.D.A. Risk Management Agency (RMA) and private Crop Insurance venders have developed a set of Insurance programs to help control Crop production risks at a reasonable cost. Crop Insurance coverage is not mandatory, but it does provide a financial safety net in case of severe production losses.
Petri Liesivaara - One of the best experts on this subject based on the ideXlab platform.
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The Demand For Public-private Crop Insurance And Government Disaster Relief
Journal of Policy Modeling, 2020Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Insurance premium subsidies and disaster relief payments are government actions that can help to smooth farmers’ incomes between years. In the EU Crop Insurance based on public–private partnership is promoted. We present an analysis based on farmers’ stated preferences with split data approach of Crop Insurance and disaster relief provided by the government. Results reveal that farmers’ willingness to pay for Crop Insurance is conditional on the prospect for government disaster relief. Results show that possibility for disaster relief payments will lead to extensive use of taxpayers’ money if Crop Insurance premiums are subsidized.
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The demand for public-private Crop Insurance and government disaster relief
2020Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Insurance premium subsidies and disaster relief payments are government actions that can help to smooth farmers’ incomes between years. In the EU Crop Insurance based on public-private partnership is promoted. We present an analysis based on farmers’ stated preferences with split data approach of Crop Insurance and disaster relief provided by the government. Results reveal that farmers’ willingness to pay for Crop Insurance is conditional on the prospect for government disaster relief.
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Willingness to pay for agricultural Crop Insurance in the northern EU
Agricultural Finance Review, 2014Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Purpose - – The purpose of this paper is to investigate the demand for Crop Insurance. Moreover, farmer willingness to pay (WTP) for Crop Insurance was derived. Factors affecting the demand were also examined in a country where Crop Insurance products are not currently available. Sensitivity analysis was conducted by studying the price-anchoring effect. Design/methodology/approach - – Data from a choice experiment (CE) were analyzed with mixed logit models and the distribution of farmer WTP for Crop Insurance was derived. A split sample approach with varying premium vectors was used to analyze the price-anchoring effect. Findings - – Demand was revealed for Crop Insurance products in Finland. The demand was higher among younger farmers and farms with more arable land. WTP for Crop Insurance products was very sensitive to the premium interval presented in the CE design. Research limitations/implications - – The price-anchoring effect may disrupt the market development of Crop Insurance products, because Insurance companies may take advantage of the lack of awareness among farmers of Crop Insurance pricing. Practical implications - – The Insurance product expected indemnity was a more important factor than the deductible in determining farmer WTP for Crop Insurance. Therefore, the 30 percent deductible level set for subsidized Crop Insurance products is not an obstacle for the development of such products in the EU. Originality/value - – The study applied a well-known method (CE) to Crop Insurance in a country where these products are non-existent. The split sample approach was used to examine the price-anchoring effect on Crop Insurance.
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Government policies in changing climate and the demand for Crop Insurance
2014Co-Authors: Petri Liesivaara, Sami MyyräAbstract:Crop Insurance markets are exposed to unpredictable weather conditions. Yield risks are systemic in nature, and public intervention is often a necessity for the functioning private Crop Insurance markets. Climate change is expected to increase catastrophic weather events and yield volatility. This paper addresses the question how government actions related to extreme weather events affect the demand and farmers willingness to pay for Crop Insurance products. The analysis is based on farmers’ stated preferences with split data approach. Our results reveal that farmers’ willingness to pay for Crop Insurance was different when government disaster relief was possible compared to the situation where disaster relief was not possible. Results show that possibility for disaster relief payments in catastrophic event will lead to extensive misuse of taxpayers’ money if Crop Insurance premiums are subsidized simultaneously.
Bruce A. Babcock - One of the best experts on this subject based on the ideXlab platform.
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using cumulative prospect theory to explain anomalous Crop Insurance coverage choice
American Journal of Agricultural Economics, 2015Co-Authors: Bruce A. BabcockAbstract:Farmers’ decisions about how much Crop Insurance to buy are not generally consistent with expected utility maximization. Taking into account both marginal risk benefits and marginal subsidy effects suggests that most farmers have chosen lower coverage levels than would be predicted by standard models. By modeling financial outcomes as gains and losses, cumulative prospect theory offers an alternative framework to perhaps better understand farmers’ purchase decisions. The role of the reference point that defines outcomes as either a gain or a loss, the degree of loss aversion, curvature of the value function, and the probability weighting function in determining optimal Crop Insurance coverage levels are explored for three representative farms calibrated to 2009 conditions. Loss aversion and how Crop Insurance is framed through choice of the reference point are shown to be the key factors that determine whether predictions from prospect theory are consistent with observed Crop Insurance coverage choices. When Crop Insurance is framed as a tool to manage farm risk then optimal choices under prospect theory are not consistent with observed choices. If Crop Insurance is framed as a stand-alone investment where a loss is felt if the indemnity received is less than the premium paid, then prospect theory can generate optimal coverage level choices that are largely consistent with observed decisions. This result is shown to be robust to changes in parameterizations as long as loss aversion is maintained and if curvature of the value function is accompanied by decision weights that overweight low probability outcomes.
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The potential for Crop Insurance reform
Agricultural Finance Review, 2014Co-Authors: Nicholas D. Paulson, Bruce A. Babcock, Jonathan CoppessAbstract:Purpose - – The purpose of this paper is to discuss the growth and rising costs association with the Federal Crop Insurance program in the USA, justifications for public support, and recent reforms that have been implemented or proposed to reduce program costs. It also analyzes a specific policy to reduce premium assistance spending. Design/methodology/approach - – Data from the Risk Management Agency are used to illustrate historical trends in Crop Insurance program costs and to analyze the impacts of imposing a per acre cap on premium assistance. Findings - – Imposing a per acre cap on premium assistance could achieve significant savings. A $20 per acre cap is estimated to reduce premium subsidy expenditures by more than 40 percent. However, the impact of such a policy would be most severe on Crops currently receiving the largest subsidies per acre, which happen to be some of the largest program Crops in the USA. Originality/value - – This paper adds to the literature analyzing potential reform in Crop Insurance industry. The subsidy cap considered has been proposed and considered by policy makers, and this paper provides estimates for its potential savings.
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Time to Revisit Crop Insurance Premium Subsidies
American Journal of Agricultural Economics, 2011Co-Authors: Bruce A. BabcockAbstract:In 2000, Congress decided to move away from a fixed-dollar-per-acre premium subsidy to a subsidy percentage that applies to any Crop Insurance product offered. This change reduced the cost to farmers of moving from yield Insurance to revenue Insurance by more than 50%. In addition, Congress decided to pay a large proportion of the additional premium for higher coverage levels, paying for more than half the cost of moving from the 65% to the 75% coverage level and about 25% of the additional cost of moving from 75% to 80% coverage. Not surprisingly, farmers responded to these lower costs by moving to more expensive revenue Insurance policies and higher coverage levels. This response is part of the reason why the Congressional Budget Office projects that the cost of the Crop Insurance program exceeds $7 billion per year. The changes to the premium subsidy structure were made in an era of projected budget surpluses. Does this change still make sense now that federal deficits and overall debt levels are so high? How much could spending be reduced if the premium subsidy structure were changed back? This policy briefing paper provides insights into these questions. Congress has demonstrated repeatedly that it wants a large proportion of acres to be enrolled in the Crop Insurance program. The proven way to expand insured acreage is to subsidize farmers' Crop Insurance premiums with either a "lump sum" subsidy that gives farmers a set amount to participate in the program or a proportional subsidy that pays a set fraction of a farmer's premium. The added benefit to the Crop Insurance industry of a proportional subsidy is that it incentivizes farmers to buy higher coverage levels and more expensive revenue Insurance. If Congress had decided in 2010 to move away from the current system of proportional subsidies to the amount of premium subsidy available for yield Insurance, then the 2011 projected cost of the Crop Insurance program would have declined by about $1.4 billion from the direct savings in premium subsidies, and by another $300 million in lower underwriting gains as farmers moved away from expensive revenue Insurance. Further savings would accrue if premium subsidies were fixed at a set dollar amount because this would remove the incentive for farmers to buy more Crop Insurance than they would buy if they were spending their own money rather than taxpayer dollars. Total savings approaching $2 billion would likely accrue by simply returning to the premium structure that we had before the Agricultural Risk Protection Act. Farmers would respond to this policy change by buying less revenue Insurance and lower coverage levels. This would also reduce their out-of-pocket expenditures. Farm groups would undoubtedly oppose this change, but such opposition would be tempered if the choice were between this change and a reduction in a more valued program, such as direct payments. Underwriting gains to Crop Insurance companies would decline significantly. Both companies and agents would have the most to lose from this policy change so they would be expected to oppose it strongly. But in an era of tight budgets, the tax dollars spent on subsidies that incentivize farmers to buy more and different types of Crop Insurance than they would buy with their own dollars could fall under intense scrutiny.
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The Political Economy of the US Crop Insurance Program
The Economic Impact of Public Support to Agriculture, 2010Co-Authors: Bruce A. BabcockAbstract:Taxpayer support for the Crop Insurance industry has grown rapidly since 2000 even though total Crop acres insured is stagnant and the number of policies sold has declined. Staunch support for the program by key members of Congress meant defeat for proposals in the 2008 Farm Bill to significantly reduce cost. These proposals included large changes in the formulas used to calculate industry reimbursement and for new programs that would be integrated with or reduce the amount of risk insured by the Crop Insurance program. The reason for this resilience is program complexity and biased analysis, which has allowed the industry to claim that they are undercompensated despite a doubling of taxpayer support. One unforeseen outcome of the strength of the Crop Insurance industry in protecting its interests is that a new Insurance program called Average Crop Revenue Selection (ACRE) was passed in the farm bill. Large unintended consequences that could be brought about by ACRE include the likely demise of the marketing loan and countercyclical programs, increased risk that the United States will violate its amber box limits, and in the not-too-distant future, a complete change in the way that US Crop Insurance is delivered to farmers.
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actuarial fairness of Crop Insurance rates with constant rate relativities
American Journal of Agricultural Economics, 2004Co-Authors: Bruce A. Babcock, Chad E. Hart, Dermot J HayesAbstract:Increased availability and demand for low-deductible Crop Insurance policies have increased focus on Crop Insurance rating methods. Actuarial fairness cannot be achieved if constant multiplicative factors are used to determine how premiums change as coverage levels increase. A comparison of premium rates generated by the factors used by the two most popular Crop Insurance products with those generated by a standard yield distribution shows that the popular Insurance products overcharge for low-deductible policies in most counties. This overpricing may explain why large premium subsidies were required to induce farmers to move from low-deductible to high-deductible policies beginning in 2001.
Chad G. Marzen - One of the best experts on this subject based on the ideXlab platform.
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Statutes of Limitation and Crop Insurance
2018Co-Authors: Chad G. MarzenAbstract:Crop Insurance litigation presents a number of statute of limitations-related questions. Despite a rich scholarship in Crop Insurance, there is an absence of a comprehensive examination of the significant legal cases relating to the application of statutes of limitation and contractual limitations periods to Crop Insurance disputes. This Article contributes to the academic literature on Crop Insurance by analyzing key cases involving statute of limitations questions in state and federal cases involving Crop Insurance. Part I of this Article discusses cases involving the Federal Crop Insurance Corporation. Part II examines cases which have addressed the question of when a Crop Insurance claim accrues. The issue of tolling and equitable tolling with Crop Insurance claims is analyzed in Part III. Part IV of the Article examines the question of whether the Federal Crop Insurance Act preempts state statutes of limitation in the Crop Insurance context. Part V analyzes several other legal issues involving statutes of limitation and Crop Insurance. With the presence of Crop Insurance cases that have been decided in recent years, statute of limitations-related questions in the Crop Insurance area are likely to be litigated in the future.
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Bankruptcy and Federal Crop Insurance
Virginia Environmental Law Journal, 2015Co-Authors: Chad G. MarzenAbstract:In the area of Insurance law, there are several commentators who have written on the relationship between Insurance law and that of bankruptcy law. But there is a gap in the literature relating to bankruptcy law and the law of federal Crop Insurance specifically. This article is intended to examine the nexus between bankruptcy law and the federal Crop Insurance program by analyzing some of the key issues which have appeared in litigated cases. From issues relating to replacement liens on Crops, allegations of misrepresentations and its effects on a bankruptcy proceeding, setoffs, adequate protection of security interests, statutes of limitations, whether Crop Insurance proceeds are part of the bankruptcy estate, to preemption issues, the law of bankruptcy and the law of federal Crop Insurance intersect in a variety of interesting contexts.
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Climate Change and Federal Crop Insurance
Boston college environmental affairs law review, 2015Co-Authors: Chad G. Marzen, J. Grant BallardAbstract:The federal Crop Insurance program is well-positioned today to promote resilient agricultural practices that mitigate the future impact of climate change. In light of climate change risk, this Article examines issues relating to climate change and the federal Crop Insurance program. Part I of this Article examines the present risk of climate change in agriculture and discusses recent steps taken to address climate change in agriculture in general, specifically within the federal Crop Insurance program. As a condition to federal Crop Insurance coverage, a farmer-insured must utilize "good farming practices" to obtain coverage for covered causes of loss. Part II examines the role of "good farming practices" determinations and its effects on climate change. This Article addresses three cases decided within the past five years and contends that the increasing number of cases in the federal courts indicate that an amendment to the "good farming practices" standard may have a significant effect in promoting climate change mitigation. This Article concludes by proposing an amendment to the "good farming practices" standard. The proposed standard dictates that if a farmer utilizes "sustainable, resilient and soil-building agricultural practices," then such utilization must be weighed as a substantial factor in support of a "good farming practices" determination by the Risk Management Agency.
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Crop Insurance Bad Faith: Protection for America's Farmers
SSRN Electronic Journal, 2013Co-Authors: Chad G. MarzenAbstract:It is anticipated a large number of farmers will be filing Crop Insurance claims with private Crop insurers in the wake of the drought of 2012. It is also possible that there will be instances where a private Crop insurer allegedly acts in bad faith concerning a claim.The future availability of a Crop Insurance bad faith remedy is a critical issue for America’s farmers facing the courts. This article offers an examination of the issues surrounding Crop Insurance bad faith liability. The first part of the article provides an overview of the history, scope and availability of the Federal Crop Insurance Corporation and federal Crop Insurance program which helps protect America’s farmers. Next, the article discusses reported cases which have involved situations where Crop Insurance bad faith has been provided as a remedy for insurer misconduct. The article also examines caselaw to date on the issue of federal preemption of bad faith claims under state law by the FCIA and the development of a general rule that bad faith claims under state law are not preempted by the FCIA. Finally, the article discusses the critical recent decision of the Tennessee Court of Appeals in Plants v. Fireman’s Fund which places the future availability of the Crop Insurance bad faith remedy in question. In conclusion, the Crop Insurance bad faith remedy is designed as a check against egregious, intentional and reckless misconduct of a Crop insurer in the handling of a claim and should be preserved by the courts.
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Crop Insurance Fraud and Misrepresentations: Contemporary Issues and Possible Remedies
William and Mary Environmental Law and Policy Review, 2013Co-Authors: Chad G. MarzenAbstract:Fraud in the federal Crop Insurance program has been currently estimated to cost taxpayers in the millions of dollars. Despite efforts by both private Crop insurers and the federal government to combat fraud associated with claims in the program, Crop Insurance fraud, and misrepresentations associated with Crop Insurance policies, remain a significant issue of national concern.This article offers a comprehensive examination of contemporary legal issues concerning the issue of Crop Insurance fraud and misrepresentations. Section I provides an overview of the contemporary problem of fraud in Crop Insurance and discusses the responses of both private insurers and the federal government to curb and combat waste, fraud and abuse in the program. Section II explores the variety of legal remedies to combat Crop Insurance fraud and misrepresentations among reported cases. In criminal law, the possibility of substantial criminal sentences (of up to 30 years in prison) and criminal prosecutions of Crop Insurance fraud serve as a deterrence to the commission of acts of fraud. Substantial monetary civil penalties also exist to deter fraud. In addition, misrepresentations in applications for Crop Insurance, particularly the misrepresentations of actual interests in Crops, have led to cases where insureds cannot recover for damages due to covered causes of losses.The current magnitude of fraud and abuse in the federal Crop Insurance program reflects the need for more aggressive action to further eliminate abuses to help ensure the federal Crop Insurance program remains a vital source of support for America’s farmers. In the light of the significant issue of fraud and/or misrepresentations associated with policies in the federal Crop Insurance program, Section III proposes several additional measures which can be implemented by legislation and by judicial interpretation to further combat fraud.