Study On Area-Based Crop Yield Insurance In Beijing

Traditional agricultural insurance has serious adverse selection and moral hazardproblems, leading to high transaction costs. Area-based yield insurance has no adverseselection and moral hazard problems, lower management costs, less need of governmentsubsidies. The product structure is simple so it is easier to sell and promote. Basis risk isinherent with area-based yield insurance. It is possible for a farm to experience a yieldshortfall and yet receive no indemnity. This would occur if a peril reduced the yield on afarm but was not sufficiently systemic to reduce yield measured at the county level.The Group Risk Plan (GRP) of American and the National Agricultural InsuranceScheme (NAIS) of Indian are two successful examples of area-based yield insurance. ForChina, it is very important to learn from the successful experience of GRP and NAIS.Agricultural insurance in Beijing has made some achievements, but there are alsosome problems such as adverse selection and moral hazard is difficult to control,settlement of claims is difficult, systemic risk is not covered, safeguard level is too low,and the terms of the contract are not popular. To carry out area-based yield insurance cansolve these problems. Base risk of Beijing is not serious enough to not be controlled, theregional production data is relatively complete, farmers have a relatively high insuranceawareness, the Government has the ability to assume a high level of catastrophe risk,insurance companies have a higher operating level, these are the development of regionalproduction insurancefavorable conditions.This paper argues that to improve the area-based yield insurance product design,Beijing should focus on various aspects, including the selection of insured area, indemnitypayout rules, determination of the range of franchise clause and coverage level and.Beijing should also focus on improving the operational mechanism of area-based yieldinsurance.Beijing should also use a variety of sales channels, strengthen cooperation inagricultural loans and agricultural insurance, raise the level of claims service, popularizeinsurance knowledge, guard against catastrophic risk, provide financial support, improverelevant laws, and strengthen the supervision.