Factors affecting crop insurance purchase decisions by farmers in northern Illinois

Purpose - The purpose of this paper is to determine which factors are most influential to farmers' crop insurance purchasing decisions in northern Illinois. Design/methodology/approach - A mail survey method was used to collect information from farmers in a 42 county region of Illinois. Findings - Of the factors analyzed, price had the most significant effect on crop insurance purchase decisions. While acres farmed had statistically significant impact on most of the crop insurance purchase decisions, different factors played a role in purchase decisions based on types of insurance and types of crops covered. Research limitations/implications - The results of this study warrant additional research relative to crop insurance purchase decisions. Analyzing the affect of varying degrees of government subsidization across crop insurance plans and coverage levels on purchase decisions is recommended. Questions regarding the relationship between crop insurance subsidization, farm program payments, and ad hoc disaster payments would be relevant in light of World Trade Organization and federal budget discussions. Also, asking participants to indicate if they have a written grain marketing plan and if that plan leverages crop insurance coverage to support forward contracting or pre-harvest pricing would provide additional insights in determining how crop insurance purchase decisions are made. Questions regarding the claims process should be incorporated into future studies on this topic. The timeliness of claims payments, as well as the farmer's level of satisfaction with the claims adjustor and claims process may factor into the decision-making process. Practical implications - Illinois farmers and crop insurance agencies could benefit from this study. Findings could improve the crop insurance products and services available to Illinois farmers and make the federal crop insurance program more effective in enhancing farmers' ability to manage crop production risk. Originality/value - This paper identified the factors that are most influential to farmers' crop insurance purchasing decisions in northern Illinois.