2
Historically, many government-subsidized MPCI programs, especially in developing countries,have performed poorly because administration cost is generally too high. The high transaction cost has been attributed to asymmetric information problems. When one party
—
in this case the farmer
—
knows more about the nature of his risk than the insurer, the cost of obtaining information and monitoring
the client’s
behaviour can be prohibitive. The geographical dispersion of agriculture production makes the operational and administrative costs of delivering crop insurance higher than other types of insurance