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Title:Three Essays on Systemic Risk and Rating in Crop Insurance Markets
Author(s):Woodard, Joshua D.
Doctoral Committee Chair(s):Sherrick, Bruce J.
Department / Program:Agricultural and Consumer Economics
Discipline:Agricultural and Consumer Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Economics, Finance
Abstract:The third essay examines the actuarial implications of the Loss Cost Ratio (LCR) ratemaking methodology employed by the Federal Government for setting base rates for the program, and identifies specific conditions required for the LCR methodology to result in unbiased rates. Specifically, constant relative risk through time and other restrictive requirements are required. These requirements are tested against a unique farm-level data set. The results indicate that the conditions required for the LCR to produce unbiased rates are violated for a large number of actual farmers. Implications include that the current ratemaking produces biased rates that are 75%-180% in excess of actuarially fair premiums in Illinois. A simple correction function is proposed and illustrated.
Issue Date:2008
Description:155 p.
Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2008.
Other Identifier(s):(MiAaPQ)AAI3337964
Date Available in IDEALS:2015-09-25
Date Deposited:2008

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