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Patterns of Collusion in the U.S. Crop Insurance Program: An Empirical Analysis

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  • Rejesus, Roderick M.
  • Little, Bertis B.
  • Lovell, Ashley C.
  • Cross, Mike H.
  • Shucking, Michael

Abstract

This article analyzes anomalous patterns of agent, adjuster, and producer claim outcomes and determines the most likely pattern of collusion that is suggestive of fraud, waste, and abuse in the federal crop insurance program. Log-linear analysis of Poisson-distributed counts of anomalous entities is used to examine potential patterns of collusion. The most likely pattern of collusion present in the crop insurance program is where agents, adjusters, and producers nonrecursively interact with each other to coordinate their behavior. However, if a priori an intermediary is known to initiate and coordinate the collusion, a pattern where the producer acts as the intermediary is the most likely pattern of collusion evidenced in the data. These results have important implications for insurance program design and compliance.

Suggested Citation

  • Rejesus, Roderick M. & Little, Bertis B. & Lovell, Ashley C. & Cross, Mike H. & Shucking, Michael, 2004. "Patterns of Collusion in the U.S. Crop Insurance Program: An Empirical Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(2), pages 1-17, August.
    • Handle: RePEc:ags:joaaec:43393
    DOI: 10.22004/ag.econ.43393
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    1. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economic Reports 34081, United States Department of Agriculture, Economic Research Service.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    3. Pierre Picard, 2012. "Economic Analysis of Insurance Fraud," Working Papers hal-00725561, HAL.
    4. Ker, Alan P., 1999. "Private Insurance Companies and the U.S. Crop Insurance Program," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 14(3), pages 1-2.
    5. Alger, Ingela & Albert Ma, Ching-to, 2003. "Moral hazard, insurance, and some collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 225-247, February.
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    Cited by:

    1. Rejesus, R. & Park, S. & Zheng, X. & Goodwin, G., 2018. "How does a Fraud Mitigation Program Influence Insurance Claims filing Behavior? Evidence from the "Spot Check List" Program in U.S. Crop Insurance," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277452, International Association of Agricultural Economists.
    2. Sungkwol Park & Xiaoyong Zheng & Roderick M. Rejesus & Barry K. Goodwin, 2022. "Somebody's watching me! Impacts of the spot check list program in U.S. crop insurance," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(3), pages 921-946, May.
    3. Pierre Picard, 2012. "Economic Analysis of Insurance Fraud," Working Papers hal-00725561, HAL.
    4. Delay, Nathan & Chouinard, Hayley & Walters, Cory & Wandschneider, Philip, 2020. "Examining the Role of the Crop Insurance Selling Agent," Cornhusker Economics 307133, University of Nebraska-Lincoln, Department of Agricultural Economics.
    5. Nathan D. DeLay & Hayley H. Chouinard & Cory G. Walters & Philip R. Wandschneider, 2020. "The influence of crop insurance agents on coverage choices: The role of agent competition," Agricultural Economics, International Association of Agricultural Economists, vol. 51(4), pages 623-638, July.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other

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