The influence of crop insurance agents on coverage choices: The role of agent competition |
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| Authors: | Nathan D DeLay Hayley H Chouinard Cory G Walters Philip R Wandschneider |
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| Institution: | 1. Department of Agricultural Economics, Purdue University, West Lafayette, Indiana, USA;2. Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, Colorado, USA;3. Department of Agricultural Economics, University of Nebraska, Lincoln, Nebraska, USA;4. Emeritus, School of Economic Sciences, Washington State University, Pullman, WA, USA |
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| 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. |
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| Keywords: | crop insurance agents federal crop insurance market power |
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