AN EMPIRICAL-ANALYSIS OF THE DEMAND FOR MULTIPLE PERIL CROP INSURANCE

Knowledge of factors affecting farmer purchases of crop insurance is e ssential for evaluating the soundness and profitability of crop insura nce programs. Despite this importance, the demand for crop insurance h as 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 produce rs with differing levels of loss-risk have different demand elasticiti es. Loss-fisk is included in the empirical analysis and is found to in fluence the elasticity of demand. Results show average demand elastici ties of about -0.32 for relative insured acres and -0.73 for liability per planted acre. Implications for the actuarial soundness of the ind ustry are provided.