Modelling the switch from hail insurance to antihail nets

Marco Rogna, Günter Schamel and Alex Weissensteiner

Australian Journal of Agricultural and Resource Economics, 2023, vol. 67, issue 1, 118-136

Abstract: We analyse the impact of the antihail net promotion on the actuarial soundness of the hail insurance market. Specifically, we present a simple model showing that, in the presence of an imperfect insurance market, incentives for antihail nets could cause low‐risk farmers to exit the insurance market more likely than high‐risk ones. This induces a typical adverse selection problem. The theoretical model predictions are corroborated by an empirical investigation. Based on a fixed‐effect conditional logit regression, we show that a higher per‐hectare output value and a location strongly affected by hail both increase the chance that a plot is hedged through antihail nets.

Date: 2023
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https://doi.org/10.1111/1467-8489.12499

Related works:
Journal Article: Modelling the switch from hail insurance to antihail nets (2022)
Working Paper: Modeling the Switch from Hail Insurance to Anti-Hail Nets (2019)
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