Bayesian ratemaking procedure of crop insurance contracts with skewed distribution |
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Authors: | Vitor A Ozaki Ralph S Silva |
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Institution: | 1. Department of Mathematics and Statistics, Escola Superior de Agricultura Luiz de Queiroz , University of S?o Paulo , Piracicaba , Brazil;2. School of Economics, University of New South Wales , Sydney , Australia |
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Abstract: | Over the years, crop insurance programs became the focus of agricultural policy in the USA, Spain, Mexico, and more recently in Brazil. Given the increasing interest in insurance, accurate calculation of the premium rate is of great importance. We address the crop-yield distribution issue and its implications in pricing an insurance contract considering the dynamic structure of the data and incorporating the spatial correlation in the Hierarchical Bayesian framework. Results show that empirical (insurers) rates are higher in low risk areas and lower in high risk areas. Such methodological improvement is primarily important in situations of limited data. |
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Keywords: | crop insurance Bayesian hierarchical model premium rate skew-normal distribution spatial correlation |
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