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A Spatial Econometric Analysis of Loss Experience in the U.S. Crop Insurance Program
Author(s) -
Woodard Joshua D.,
Schnitkey Gary D.,
Sherrick Bruce J.,
LozanoGracia Nancy,
Anselin Luc
Publication year - 2012
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2010.01397.x
Subject(s) - economics , econometric model , crop insurance , econometrics , econometric analysis , agricultural economics , welfare , insurance premium , actuarial science , agriculture , geography , market economy , archaeology
Patterns in loss‐ratio experience in the U.S. corn insurance market are investigated with a spatial econometric model. The results demonstrate systematic geographically related misratings and provide estimates of the impacts of several observable factors on the magnitude of misrating in the program. The model is used to estimate actuarial cross‐subsidizations across the primary corn‐producing states and counties. The impacts of the primary factors are substantial, resulting in net premium transfers of approximately 26 percent of total premiums annually. The misratings likely have important insurance demand, welfare, and land‐use implications.