ARE ADDED LAND AND NEW PRODUCER PROVISIONS IN CROP INSURANCE VULNERABLETO ABUSE? IMPLICATIONS FOR INSURED TEXAS COTTON PRODUCERS

摘要

Reducing crop insurance program vulnerabilities is important to the welfare of Texas cotton producers because excessivelosses due to the abuse of these vulnerabilities may result in crop insurance premium increases. This study analyzes the addedland and new producer provisions in crop insurance and evaluates whether these provisions are vulnerable to abuse. The vulnerabilityof the added land and new producer provisions primarily stems from the informational advantage held by the producerwith regards to the inherent productive capacity of his land. A descriptive analysis of data from insured Texas cottonproducers showed statistically higher indemnity-to-premium (IP) ratios for producers utilizing the added land and new producerprovisions, compared to producers using actual production history. This result suggests that the added land and newproducer provisions are vulnerable to abuse and there is a need for policy makers to reassess these provisions. Several policyoptions are suggested in this paper to help ameliorate the vulnerability of the added land and new producer provisions.