Crop Insurance Case Study

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Introduction Unexpected events with adverse results such as drought, typhoons, disease infestation, or earthquake can cause risks in farming activities. The Philippines is very much vulnerable to these production risks. The Philippines ranks 8th among the top 10 countries that are most exposed to natural hazards or multiple hazards (Regalado, 2010). Almost annually, heavy crop damages have been reported as caused by typhoons, droughts, and other natural calamities. However, risks and uncertainties could be managed so that the impact could be minimized. Risk management is concerned with reducing the possibility of unfavorable outcomes, or at least softening their effects. Insurance is generally defined as: the form of risk management primarily used to hedge against the risk of a contingent, uncertain loss (Dickson, 1960).…show more content…
The two most commonly perceived problems of the agricultural sector that have directed public policy are too low incomes and too unstable incomes. Crop insurance implemented as a public policy seeks to address both these concerns.As argued by Leatham et al (1987) crop insurance would only be preferred by moderately risk-averse farmers when farm firm failure becomes an issue. In the Philippines, crop insurance is not a commonly used risk management practice. The government offers subsidized crop insurance to promote it as an important riskmanagement tool, and at the same time encourage farmers to participate in the crop insurance program. Hence, crop insurance in the country is highly subsidized by the government. It is commercialized by the Philippine Crop Insurance Corporation (PCIC), a government-owned insurance company. Currently, PCIC is offering two types of insurance programs, namely regular and special programs. For the regular program, the premium is either shared by the borrowing

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