Empirically-Based Crop Insurance for China: A Pilot Study in the Down-middle Yangtze River Area of China

Factors that caused slow growth in crop insurance participation and its ultimate failure in China were multi-faceted including high agricultural production risk, low participation rate, inadequate public awareness, high loss ratio, insufficient and interrupted government financial support. Thus, a clear and present need for data driven analyses and empirically-based risk management exists in China. In the present investigation, agricultural production data for two crops (corn, rice) in five counties in Jiangxi Province and Hunan province for design of a pilot crop insurance program in China. A crop insurance program was designed which (1) provides 75% coverage, (2) a 55% premium rate reduction for the farmer compared to catastrophic coverage most recently offered, and uses the currently approved governmental premium subsidy level. Thus a safety net for Chinese farmers that help maintain agricultural production at a level of self-sufficiency that costs less than half the current plans requires one change to the program: ≥80% of producers must participate in an area.