Summary |
The general objective of the study is to analyse the viability of the pilot crop insurance programme in India. The major focuses of the book are:
i. To review the literature against crop insurance on theoretical grounds
ii. To do a Monte Carlo simulation of the Indian programme in order to study the effects of various factors affecting demand and supply of crop insurance.
iii. To analyse insurability for alternative conditions under the individual yield approach.
Crop insurance programems for multiple risks suffer from problems of moral hazards and adverse risk selections. One method of avoiding these problems is to estimate premiums and indemnities on the basis of area yields.
It is concluded that for reasonable values of risk aversion and of correlation between farmers and area yields, the subsidy required under the homogeneous area yield approach is less than under the individual yield approach.
If the administrative expenses are higher than the subsidy may still be higher, Insurability under alternative values of these parameters for various wealth levels is also discussed under both the approaches.
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