Comparison of cotton insurance policy between the US and China

The US and China are the two top cotton producing countries in the world and the policy and experience of cotton insurance from the US are of great significance for China. This paper compared cotton production status, production cost, and cotton insurance policies, which include insurance object, insurable risk, coverage level, premium subsidy, and database support, between these two countries. Results show that lower cotton production cost is highly related to the high risk protection function of cotton insurance in the United States. Cotton insurance in the US has the following features: revenue-oriented insurance, high coverage level, diversified insurance units and different premium subsidies. In China, cotton insurance innovation is under developing and mainly based on materialized cost insurance which covers roughly the direct materialized cost. China’s cotton insurance has the following characteristics: low coverage level (less than production cost), unitary insurance coverage, and inefficient premium subsidy policy. Based on US cotton insurance experiences, this paper provides the following suggestions for China’s cotton insurance policy: strengthening data support, encouraging product innovation of cotton insurance, and optimizing the premium subsidy policy.