Developing Variable Unit-Structure Premium Rate Differentials in Crop Insurance

Federal crop insurance programs offer producers the option of insuring farm units individually or as an aggregate unit. Existing programs offer a fixed 10% discount for most growers taking coverage at the aggregate level. This article describes an analysis of risk changes when units are aggregated. The methods described here, which base unit aggregation discounts on observable farm characteristics, are approved for implementation into the Federal Crop Insurance Program. Copyright 2010, Oxford University Press.