nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒02‒07
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Climate Effects on Rainfall Index Insurance Purchase Descisions By Novak, James; Nadolnyak, Denis
  2. Price Variation in Markets with Homogeneous Goods: The Case of Medigap By Nicole Maestas; Mathis Schroeder; Dana Goldman
  3. The Impact of the Average Crop Revenue Election (ACRE) Program on the Effectiveness of Crop Insurance By Hong, Sung Wook; Power, Gabriel J.; Vedenov, Dmitry V.
  4. Evaluation of Risk Management Methods for Satsuma Mandarin By Lindsey, Jeanne K.; Duffy, Patricia A.; Nelson, Robert G.; Ebel, Robert C.; Dozier, William A.

  1. By: Novak, James; Nadolnyak, Denis
    Abstract: Rainfall Index insurance is a pilot insurance product offered to producers of hay and pasture in 9 states. This analysis examines the expected payoff of the RI insurance for bi-monthly periods based on rainfall shortage probabilities in alternative climate phases. Differences in expected returns indicate that selection of ENSO-specific optimal intervals may result in higher returns than those based on pooled rainfall series.
    Keywords: rainfall insurance, ENSO, expected indemnity, Production Economics, Risk and Uncertainty,
    Date: 2008
  2. By: Nicole Maestas; Mathis Schroeder; Dana Goldman
    Abstract: Nearly 30 percent of Americans age 65 and older supplement their Medicare health insurance through the Medigap private insurance market. We show that prices for Medigap policies vary widely, despite the fact that all plans are standardized, and even after controlling for firm heterogeneity. Economic theory suggests that heterogeneous consumer search costs can lead to a non-degenerate price distribution within a market for otherwise homogenous goods. Using a structural model of equilibrium search costs first posed by Carlson and McAfee (1983), we estimate average search costs to be $72. We argue that information problems arise from the complexity of the insurance product and lead individuals to rely on insurance agents who do not necessarily guide them to the lowest prices.
    JEL: I2
    Date: 2009–01
  3. By: Hong, Sung Wook; Power, Gabriel J.; Vedenov, Dmitry V.
    Abstract: This paper analyzes the effect of the ACRE program adopted in the final version of the 2007 Farm Bill on the risk-reducing effectiveness of insurance products. To the best of our knowledge this is a first attempt to analyze the effect of the ACRE program on the risk management decisions of crop producers. In particular, we compare the risk-reducing effectiveness of the two most common insurance contracts — APH and CRC — under the provisions of the 2002 Farm Bill and under ACRE program for representative cotton producer in Texas and corn producer in Illinois. These particular crop/region combinations are selected so as to represent situations of low and high price-yield correlations, respectively.
    Keywords: Crop insurance, Farm Bill, ACRE, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries, Risk and Uncertainty,
    Date: 2009–01–15
  4. By: Lindsey, Jeanne K.; Duffy, Patricia A.; Nelson, Robert G.; Ebel, Robert C.; Dozier, William A.
    Abstract: Simulation of production budgets were used to compare net discounted returns and the distribution of returns under alternative risk-mitigation scenarios. Results indicate that the combination of freeze protection and crop insurance increases expected net discounted 20-year returns while decreasing the downside risk. Break-even prices ranged from $.257 to $.289 per pound. Crop insurance returns were constant across price.
    Keywords: Satsuma oranges, freeze protection, crop insurance, production budget, simulation, Crop Production/Industries, Farm Management, Risk and Uncertainty, C63, D81, Q12,
    Date: 2009

This nep-ias issue is ©2009 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.