Farmer Participation, Entry and Exit decisions in the Italian Crop Insurance Program

Santeramo, Fabio Gaetano and Adinolfi, Felice and Capitanio, Fabian and Goodwin, Barry K. (2016): Farmer Participation, Entry and Exit decisions in the Italian Crop Insurance Program. Forthcoming in: Journal of Agricultural Economics , Vol. 3, No. 67 (1 July 2016)

Abstract

The factors affecting the demand for agricultural insurance in the US have been extensively studied over the last two decades. However, the determinants of a farm’s entry and exit decisions in the insurance market have received relatively little attention. Turnover in the insurance book of business is an important issue in most private and public crop insurance plans. Moreover, insurance markets in the EU are still largely under-investigated. We investigate empirically the determinants of crop insurance participation in Italy. We show that the participation rate is high for large firms and that it is negatively correlated with crop diversification, which is itself a form of insurance. High premiums tend to inhibit both entry and exit from the insurance market. Larger and wealthier farms are more likely to adopt insurance and renew coverage over time. We discuss implications of our results for public intervention and the private industry. In particular, we demonstrate that the decision to drop coverage by an insured grower may differ significantly from the corresponding decision to enroll in an insurance program by an uninsured farmer. To the extent that policymakers want to encourage participation in subsidized crop insurance programs, education and outreach efforts toward uninsured farmers may differ substantially from those directed toward keeping insured farmers enrolled in the program. We investigate these differences.

• Item Type: MPRA Paper
• Language: English
• Keywords: Agricultural Policy, Risk Management, Insurance, Turnover
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy

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