Where is Your Crop Insurance Agent? Understanding the Geographical Distribution of Agents

Following the modifications to the Standard Reinsurance Agreement (SRA) in 2010, there was limited understanding of the impact of policy changes on agent availability. Our objective is to construct a model of the equilibrium supply of crop insurance agents and to test hypotheses regarding the factors influencing agent concentration, such as commissions, competition, and risk. We developed a theoretical equilibrium model of the federal crop insurance market, which encompasses three tiers: insurance companies, agents, and farmers. The model incorporates key features of the federal program, including government-set premiums and the stipulation that agents cannot refuse coverage or modify premiums for farmers within their jurisdiction. Agents derive their income from commissions, which are a percentage of the premiums on the policies they sell. The model consists of: farmer demand, insurance company behavior, and agent entry and equilibrium.