The Role of Crop Insurance in Rural Development: A Case Study in Fars Province of Iran

One of the main purposes of insurance is to influence use efficiency for different inputs of insured farmers. This can catalyze rural development and lead to an increase in income and welfare of farmers in rural communities. The objective of the present study is to examine the influence of farm product insurance on the production efficiency of agricultural operators and economic development of rural communities. We selected farm cultivators in Fars province as our research community. The data were collected in a cross sectional manner and from three climatic zones including warm semidesert, Mediterranean, and cold mountainous in year 2005. It used multi -stage stratified cluster sampling procedures and two groups of farmers - insured and non insured- were interviewed. The sample included 162 insured and 248 non insured farmers. The results indicated that insurance has a positive influence on the production of wheat cultivators in Mediterranean zone, while its impacts on the production of wheat cultivators in semidesert, and mountainous zones were partly negative and negative respectively. We can conclude that insurance -with respect to increase in production - has a random effect in most areas and farms. The increase in production is dependent mostly on personal and managerial traits of the insured. Thus, the promotion of crop insurance efficiency is dependent on supplying extension services to raise farmer’s awareness about the merits of insurance, mechanisms to raise production and efficiency of using inputs.