Estimation of Crop Yields and Insurance Premiums Using a Shrinkage Estimator

Sebastain Awondo, Octavio Ramirez, Gauri S. Datta, Gregory Colson and Esendugue G. Fonsah

North American Actuarial Journal, 2018, vol. 22, issue 2, 289-308

Abstract: We explore the estimation of crop yields and insurance premiums using a hierarchical Bayes small area estimator. The estimator is evaluated for Area Yield Production (AYP) policy using quasi-simulated corn yields in the United States. Its performance in producing reliable mean county yield and premium estimates is compared to that of a naive estimator. We also investigate the impact of these efficiency improvements on the residual losses between a farm-level policy and AYP. The proposed estimator is found to be substantially more efficient and less biased than the naive estimator.

Date: 2018
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DOI: 10.1080/10920277.2017.1404477

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