This study focused on how to redesign MPCI and GRP so that they are more attractive to
farmers. Here we propose multiyear MPCI and GRP that insurance terms are extended to
more than a year. Our simulation results showed that the actuarially-fair rate for a multiyear insurance program was lower than the actuarially-fair rate for a single year insurance program when the correlation of yield distribution among years decreased. Our real data results also showed that the correlations of yields among years are not strong. Therefore, the proposed multiyear insurance program can be practical and will provide more interests for farmers to participate in the MPCI and GRP. We also discussed farmers’ welfare under
different crop insurance plans. We are concerned about producers’ participation and
producers’ behaviors if multiyear insurance plans become available. As optimal coverage
levels can reflect both the decision to participate and producers’ behavior when buying insurance, we used empirical models to simulate a producer’s decisions given price and yield risks and with various degrees of risk aversion. We focused on three scenarios of risk aversion that represent the risk preferences commonly reported in the empirical literature,
high risk aversion, and risk neutrality.