The Government of India introduced a crop insurance scheme in February 2016 to provide financial support to

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The Government of India introduced a crop insurance scheme in February 2016 to provide financial support to farmers in the event of crop failure due to natural calamities, pests, and disease. Insurance coverage is compulsory for some farmers but voluntary for others. Part of the premium rate is paid for by the national and state governments. A government that contracts with a private insurer to deliver a program may compensate that insurer in alternative ways. Discuss which of the following compensation schemes are more likely to lead to opportunistic behavior by insurance companies: the insurer receives a percentage of each approved claim, the insurer receives an hourly rate to handle claims, the insurer receives a flat fee, or the insurer sets a premium that the government subsidizes.

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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