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Determinants of Anomalous Prevented Planting Claims: Theory and Evidence from Crop Insurance

Published online by Cambridge University Press:  15 September 2016

Roderick M. Rejesus ,
Ashley C. Lovell ,
Bertis B. Little  and
Mike H. Cross
Roderick M. Rejesus
Affiliation:
Department of Agricultural and Applied Economics, Texas Tech University, Lubbock
Ashley C. Lovell
Affiliation:
Center for Agribusiness Excellence, Tarleton State University, Stephenville, Texas
Bertis B. Little
Affiliation:
Center for Agribusiness Excellence, Tarleton State University, Stephenville, Texas
Mike H. Cross
Affiliation:
Planning Systems, Inc., Stephenville, Texas
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Abstract

This study examines the factors that determine the likelihood of submitting a potentially fraudulent prevented planting claim. A theoretical model is developed and the theoretical predictions are empirically verified by utilizing a binary choice model and crop insurance data from the southern United States. The empirical results show that insured producers with higher prevented planting coverage, lower dollar value of expected yield, and a history of submitting prevented planting claims are more likely to submit an anomalous prevented planting claim. The empirical model also suggests revenue insurance plans may be more vulnerable to prevented planting fraud than the traditional yield-based insurance plan. Results of this study can be valuable to compliance offices in their efforts to find “indicators” of fraudulent behavior in crop insurance, especially with regard to prevented planting.

Keywords

crop insurancefalsificationfraudmoral hazardprevented plantings
Type
Articles
Information
Agricultural and Resource Economics Review , Volume 32 , Issue 2 , October 2003 , pp. 244 - 258
Copyright
Copyright © 2003 Northeastern Agricultural and Resource Economics Association 

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