The influence of crop insurance agents on coverage choices: The role of agent competition

Authors

Nathan Delay, Purdue UniversityFollow
Hayley Chouinard, Colorado State UniversityFollow
Cory Walters, University of Nebraska - LincolnFollow
Philip Wandschneider, Washington State UniversityFollow

Date of this Version

2020

Citation

Agricultural Economics. 2020;51:623–638.

DOI: 10.1111/agec.12576

Comments

This is an open access article under the terms of the Creative Commons Attribution License,

Abstract

We examine how competition among crop insurance agents affects coverage choice in the federal crop insurance program. Agents may influence producers’ insurance decisions to maximize their total compensation. We develop a theoretical model of producer–agent interaction to examine how loss potential, agent compensation mechanisms, and market competition affect the coverage level selected. Using crop insurance unit-level datasets from five states, we find evidence that agent market concentration and agents’ market share matter in the insurance coverage decisions of producers but that the economic significance of the influence is relatively small. Agent influence over coverage level, premium, and liability choice is generally positive but inconsistent across states, which may be attributable to differences in loss risk and agent compensation mechanisms.