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Abstract
Equity and efficiency considerations in area versus individual crop insurance are investigated for 609 Ontario
cash crop farms. Results show that the relationship between individual and area premiums and risk reduction are
explained by systematic and non-systematic yield risk relationships. On average, area insurance premiums are much
lower than individual yield insurance premiums, and in terms of efficiency in risk-reduction individual plans are
superior to area plans. As it turns out arguments of asymmetric information which has lead some researchers to
investigate area vs. individual yield insurance is not totally resolved. Inequities in the benefits of area plans across
farmers are not equitably distributed, favouring high-risk producers. Adverse selection causes instability in the
pooled contracts which will ultimately cause area insurance plans to fail.