Temperature Insurance: An Alternative to Frost Insurance in Citrus

PRIOR to the creation of the Federal Crop Insurance Corporation through Title 5 of the Agricultural Adjustment Act of 1938, there were a number of attempts at all-risk crop insurance by private companies. Without exception, these ventures into general crop insurance by private companies have been short lived. Writers in the field have attributed failure primarily to (1) lack of adequate actuarial data, (2) adverse selection of individual risks in any given year, (3) adverse selection over time due to late-season sales of insurance, (4) insurance of price as well as physical yield, and (5) inadequate geographic diversification.1 These reasons for failure, of course, do not apply with equal force to all insurance plans which have been offered by private companies. However, whatever the cause, it is clear that private companies have not met with success in offering all-risk crop insurance to farmers. The federal crop insurance experiment is now (1951) in its 12th active year. The combined operations over twelve years show an unfavorable loss ratio, although periodic revision of insurance plans based on accumulated experience has contributed to a more favorable premium indemnity balance for recent years. The features of the federal crop insurance plan which have contributed to the unfavorable loss ratio over the years have been suggested by several writers in the field.2 At least one of the important factors contributing to the failure of several private companies in the general crop insurance field must be excluded since, from the beginning, federal crop insurance has carefully avoided insuring against