CROP INSURANCE: RISKS, LOSSES, ETC. 25 
In the case of this last form of contract, however, the company bene- 
fits from a fall in price, as well as from a rise, while the insured 
who suffers damage has his indemnity reduced in proportion as the 
market price is lower than the price on the basis of which the amount 
of insurance was determined. 
It should perhaps be pointed out in this connection that such 
changes in price as have been witnessed in the last few years are 
decidedly abnormal and that under relatively stable price conditions 
the third form of contract would be practically as advantageous as 
either of the other two. There is serious danger, however, that the 
applicant for insurance will not read his contract and will not have 
his attention called by the agent to the plan of settlement, so that 
when changes in price occur he will be expecting in case of loss an 
indemnity sufficient to make his income equal to the insurance 
an acre specified in dollars on the face of the policy. 
A company writing a more liberal policy from the point of view 
of the insured must charge materially higher rates of premium than 
are required to carry out a contract with less favorable terms of 
settlement. Given a sufficient difference in premium, the third con- 
tract here considered might represent a better investment than either 
of the other two. A plan under which the company profits by a fall 
in price as well as by an advance, however, is not likely to inspire 
confidence and good will among the insured, even if allowance is 
made for this advantage to the company in the premiums charged. 
Dropping this third plan of loss adjustment from further con- 
sideration, the question still remains: Should the company writing 
crop insurance assume a material part of the risk involved in a drop 
in prices as well as that of crop failure, or should in effect yield only 
and not income be insured? Much can be said in favor of either of 
these two plans. 
The first plan is more simple to administer, since, the value of 
the crOp being agreed upon in the contract, there can be no haggling 
over which one of continuously changing market prices shall be used 
in the settlement. Furthermore, the farmer and not the company 
determines what crop shall be planted and insured. The adjustment 
of supply to market demand is, therefore, in the hands of the farmer, 
and it may be argued with much plausibility that where the control 
is there must responsibility also lie. The weakest point in the plan 
is perhaps the fact that when the market price falls below the price 
stipulated in the contract it becomes actually profitable for the 
farmer to have a damaged crop still further reduced in yield, since 
for the differences between the actual yield and the guaranteed yield 
he is compensated on a basis of a price higher than the one he re- 
ceives for his actual yield. 
