In this study, the most effective policy direction is proposed by comparing the simulation results
on the change in farmers' crop insurance purchase rate. We set the base scenario reflecting the
current level of crop insurance purchase rate under adverse selection and evaluate the effect of
additional policies through Monte Carlo simulations.
As a result of the analysis, the most influential policy is identified to be lowering the surcharge
rate. Decreasing the surcharge rate is expected to increase the likelihood of moral hazard and
adverse selection. This causes a loss of insurance company in the mid-term. On the other hand,
policy that provides an additional discount of insurance premium to low-risk farms have relatively
low effectiveness in the short-term. However, this policy is expected to increase the insurance
purchase rate of a low-risk farm, thereby reducing a loss of insurance company. This will lower
insurance premium for crop insurance in the mid-term.