Dairy Revenue Protection: Choice Determinants and Performance Assessment

Dairy Revenue Protection (Dairy-RP) is an insurance protection plan that started in 2018 and was developed to insure revenue for a given quarter. When purchasing Dairy-RP policies producers are faced with five decisions, where the most important is their pricing option as they can lock in future prices on either class option pricing or component option pricing. The other remaining producer-selected terms are the quarter of the year they wish to cover, how much milk they would like to insure as well as coverage level and a protection factor. Within the past five years of this policy being active there has been a large uptake in class pricing policies whereas the number of component pricing policies has decreased from year to year. The first chapter of this study aims to determine the selective terms that lead to whether the policy is under class pricing or component pricing. Then coupled with the historical performance over the last five years the second chapter of this study seeks to investigate which of these significant producer-selected terms lead to a larger loss ratio, as the loss ratio is indemnity payments over total premiums.