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Asymmetric Information and Profit Taking in Crop Insurance

Author

Listed:
  • Cory G. Walters
  • C. Richard Shumway
  • Hayley H. Chouinard
  • Philip R. Wandschneider

Abstract

Excess returns to producers insured by the Federal Crop Insurance Corporation can arise due to asymmetric information or from the design of the insurance programs themselves. Using unique, unit-level crop insurance contract data for major crops such as corn, soybeans, and wheat in five growing regions, we find evidence that producers in most regions may profit by selecting optional units, buy-up coverage, or by using transitional yields to participate in the federal crop insurance program. We also find evidence that advantages increase with land resource heterogeneity. However, the results do not support hypotheses that producers profit by selecting revenue insurance, nor that high levels of government "incompetence" exist in the design and administration of the crop insurance system.

Suggested Citation

  • Cory G. Walters & C. Richard Shumway & Hayley H. Chouinard & Philip R. Wandschneider, 2015. "Asymmetric Information and Profit Taking in Crop Insurance," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(1), pages 107-129.
    • Handle: RePEc:oup:apecpp:v:37:y:2015:i:1:p:107-129.
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    File URL: http://hdl.handle.net/10.1093/aepp/ppu022
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    Citations

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    Cited by:

    1. Sharma, S. & Walters, C., 2018. "Influence of Farm and Lease Type on Crop Insurance Returns," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277399, International Association of Agricultural Economists.
    2. Rolandas Drejeris & Martynas Rusteika, 2022. "New Approach to the Public Authorities’ Activities Development in the Crop Insurance System: Lithuanian Case," Agriculture, MDPI, vol. 12(8), pages 1-15, August.
    3. Fabio G Santeramo, 2019. "I Learn, You Learn, We Gain Experience in Crop Insurance Markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(2), pages 284-304, June.
    4. Rocha, Jr., Adauto B. & Fulginiti, Lilyan E. & Perrin, Richard K. & Walters, Cory G., 2022. "What is the value of crop insurance for Nebraskan farmers?," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322529, Agricultural and Applied Economics Association.
    5. Guoyong Wu & Jianwei Cheng & Fan Yang, 2022. "The Influence of the Peer Effect on Farmers’ Agricultural Insurance Decision: Evidence from the Survey Data of the Karst Region in China," Sustainability, MDPI, vol. 14(19), pages 1-14, September.
    6. Marco Rogna & Günter Schamel & Alex Weissensteiner, 2023. "Modelling the switch from hail insurance to antihail nets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 118-136, January.
    7. Sankalp Sharma & Cory G. Walters, 2020. "Influence of farm size and insured type on crop insurance returns," Agribusiness, John Wiley & Sons, Ltd., vol. 36(3), pages 440-452, June.

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