Does market competitiveness significantly affect public intervention in agricultural insurance: the case in Italy

Abstract

Analyses of agricultural insurance failures often assume the existence of competitive supply, tracing the reasons for high insurance cost and limited farmer participation to informational problems, and suggesting the need for premium subsidization in order to increase participation. However, in countries such as Spain and Italy, where agricultural insurance is most highly subsidized, it could be that supply is not fully competitive. In this article, we explore the incidence of public subsidies to agricultural insurance premia when supply is noncompetitive. Through the use of a simple empirical model of an insurance market, it is shown that, while in the case of a competitive supply, subsidies to insurance would benefit farmers, a monopolistic supply would capture most of the subsidy, thus eliminating the potential incentive towards wider participation by farmers. The model is applied to a panel of Italian farms for different levels of risk aversion to demonstrate the limited effect that a subsidy to a hypothetical all risk yield insurance would have on farmer participation in the case of monopolistic supply.

Vulnerability of agricultural areas to climatic risk and effectiveness of risk management policy scheme in Italy

“…These data confirm the results of several previous studies done on the Italian risk management system for agriculture [12][13][14], showing some critical points, in particular the value of insured base, considered to be excessively low (approximately 18 percent of national production) despite significant public contributions, and the low attractive capacity in the Southern farms.…”

Measures of Efficiency of Agricultural Insurance in Italy, Economic Evaluations

“…Its value might be fundamental in the farmer's choice. The current legislative forecasts might result in an undeniable homage to insurance companies, while they do not favor the broadening of the market to the producers (Capitanio et al 2011).…”

“…The lack of pertinence to the real requirements of the companies causes them to abandon the subsidized system, and a considerable reduction of insured values, whose negative effect results in an adjustment of the cost of the policies 23 . Furthermore, this possibility brings up the difficulties suffered by the Centre and South of Italy, due to the scarce development of its agricultural insurance market (Capitanio et al 2011). In these areas the associations do not have the same ability in doing advance payments as those working in the North.…”

¿Cuales son los determinantes de la demanda de seguros agricolas en Italia?

“…En este sentido, parece razonable afirmar que la posibilidad de apoyar el seguro agrario en virtud de estos acuerdos ha justificado políticamente, y por lo tanto reforzado, la asignación de los recursos públicos en esta dirección, a menudo sin haber efectuado un análisis detallado de la eficiencia del gasto público (Capitanio et al, 2011).…”