The Agricultural Risk Protection Act of 2000
resulted in significant efforts to introduce new
agricultural risk management products and expand
existing products. The creation of these new
products has led to a number of research and development
projects that are attempting to generate
risk management tools with value to agricultural
producers. The development of an insurance
product involves many facets that include underwriting
and actuarial rating procedures. However,
evaluating a new product evokes a fundamental
question about whether a potential insurance design
appeals to the intended user group. In other
words, is the product sufficiently attractive to the
potential clientele to justify its development costs?
This question clearly applies to private markets,
but also affects U.S. Department of Agriculture
administrators who must allocate and prioritize
research and development efforts.