Imperfect information and participation in insurance markets: evidence from Italy

Fabio Gaetano Santeramo (Department of Agricultural Sciences, University of Foggia, Foggia, Italy)

Agricultural Finance Review

ISSN: 0002-1466

Publication date: 3 April 2018

Abstract

Purpose

The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market.

Design/methodology/approach

From Italian farm-level data, the author estimates a dynamic discrete choice model of participation to investigate the role of experience. The methodology, coupled with exploratory analysis of the data, allows one to compare the relevance of different sources of experience in the crop insurance decision-making process.

Findings

The author found that experience tends to be a catalyst for insurance participation. Policy implications are discussed, in particular, the author discusses on the importance of bolstering uptake to exploit the advantages of the inertia that emerge from experience, and the importance of initiatives to increase the knowledge of crop insurance instruments.

Originality/value

To the best of the author’s knowledge, the role of experience has been underinvestigated. The analysis has the specific contribution of modeling the potential role of experience (exploited after buying an insurance contract) on uptake in crop insurance programs.

Keywords

Acknowledgements

The author wishes to thank Peter Arcidiacono, Mehmet Caner, Barry K. Goodwin, Nicholas Piggott, Rod Rejesus, Duncan Thomas, Walter Thurman, Xiao Yu Wang, Xiaoy-ong Zheng, and the participants in seminars at Duke University, University of Bari, North Carolina State University and to the EAAA Seminar on Prospects of Crop Insurance.

Citation

Santeramo, F.G. (2018), "Imperfect information and participation in insurance markets: evidence from Italy", Agricultural Finance Review, Vol. 78 No. 2, pp. 183-194. https://doi.org/10.1108/AFR-06-2017-0053

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Publisher

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Emerald Publishing Limited

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