Utilizing Topographic and Soil Features to Improve Rating for Farm‐Level Insurance Products

Previous studies have shown a strong correlation between topographic/soil features and agricultural production; however, linkages these insurance products are scarce. Agricultural is an ever-growing means of governmental support for producers globally. However, failure to set premiums that accurately reflect risk exposure can lead low participation rates and/or adverse selection. The U.S. federal crop program partly guards against this at the farm level by inducing pricing heterogeneity via rate multiplier curve, which does not consider information. We develop method econometrically incorporating information into existing rating procedures used Risk Management Agency (RMA). empirical application leverages 149,267 farm-level observations Kansas across four dryland crops (corn, soybean, sorghum, wheat), spanning forty-six years, matched fine-scale features. results suggest improve prediction accuracy yield losses can, in general, performance. improvements specific farms with limited histories, as there no commonly history ten years. This suggests substantial new or those histories particular crop, but more general likely occur given large number current participants full ten-year history.