Knowledge Bank

Multiple Peril Crop Insurance (MPCl) and GroupRisk Plan (GRP) use yield (i.e., physical) loss to determine who collects. However, insurance is bought to protect against economic loss resulting from physical loss. This study analyzes unexpected economic loss resulting from yield variation. It also compares unexpected economic loss with simulated MPCI and GRP collections for a sample of Ohio farm operators, Analysis reveals: (I) GRP's payout structure is further removed from unexpected economic loss than MPCrs, (2) MPCI collections exceed the associated unexpected economic loss in a free market, and (3) MPCI collections more closely match unexpected loss when farm programs exist.