Moral hazard in crop and livestock insurance

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Authors: Ahmet Bagci, Müşerref Küçükbayrak
Cited by: 2
References: 40

Abstract

The role of agricultural production in a global economy has grown significantly because of rapid population growth. However, it is also inherently risky, subject to unpredictable events, such as drought, extreme weather conditions, floods, frosts, pests, and market volatility. In order to mitigate these risks, producers frequently obtain some protection by purchasing crop and livestock insurance. Although insurance can provide basic protection, it can also introduce complex behavioral dynamics. The phenomena of moral hazard and adverse selection emerge because of asymmetric information. In this paper, we analyze moral hazard in crop and livestock insurance using a unique dataset of administrative records in Türkiye on all insured producers over the period 2006-2024. We find a risk of moral hazard when farmers are covered by any type of agricultural insurance. This means that farmers do not take the necessary precautions to protect their crops, leading to greater losses.

Fields of Study & Subjects

Agricultural risk and resilience Insurance and Financial Risk Management COVID-19 Pandemic Impacts

Publication details

Journal / source
Borsa Istanbul Review
Publisher
Elsevier BV
Volume
26
Issue
3
Pages
100791–100791
Publication date
8 January 2026
Language
EN