An Analysis of the Efficiency of Premium Subsidy for Crop Insurance: Focusing on the Apple

The Korean government's insurance premium subsidies for crop insurance increased the insurance participation rate, but brought a financial burden. This study analyzes budget reduction measures (the differential support system, the premium subsidy cap system, the same subsidy rate reduction) to alleviate the financial burden and efficiently operate the government budget. For the analysis, yield distribution functions of individual apple farms were estimated, and simulations were conducted. Main findings are summarized as follows. First, the differential support system has the greatest effect of improving efficiency among the budget reduction measures, and there is little reduction in the insurance participation rate. Second, the premium subsidy cap system has little effect on improving efficiency, and there is a small change in the participation rate. Third, the same subsidy rate reduction has little effect on improving the efficiency, and the participation rate decreases significantly. The differential support system is considered the most effective way to reduce the budget and is expected to have the lowest resistance from farmers. It is proposed to establish the system gradually from the low level to settle the system stably.