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Assessing Adverse Selection in Crop Insurance Markets: An Application of Parametric and Nonparametric Methods
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Shiva S. Makki
Published/Copyright:
May 1, 2007
This paper investigates adverse selection in crop insurance markets using both parametric and nonparametric methods. Our results reject the conditional independence of the choice of insurance contracts and risk of loss, implying the presence of informational asymmetries between insurers and insureds in the markets. Results also show that actual premium rates are significantly different from both pure and fair premium rates. Our findings provide useful insights into asymmetric information problems and methods to assess the risk of loss in crop insurance markets.
Keywords: crop insurance; adverse selection; non-parametrics; two-limit tobit; risk classification; risk management.
Published Online: 2007-5-1
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
crop insurance;
adverse selection;
non-parametrics;
two-limit tobit;
risk classification;
risk management.
Articles in the same Issue
- Featured Article
- Assessing Adverse Selection in Crop Insurance Markets: An Application of Parametric and Nonparametric Methods
- Ruin Probabilities under Generalized Exponential Distribution
- Applying Data Mining Technology for Insurance Rate Making: An Example of Automobile Insurance
- Managing Viagers Securitization and Life Extension Risk
- Financial Instability and Life Insurance Demand
- Asia-Pacific Country Analysis: Global Developments in Takaful (Islamic) Insurance
