Recency Effects in Crop Insurance Seminar

Guest Speaker: Dr. Peter Slade, University of Saskatchewan

Examines whether recent yield outcomes and insurance claims influence insurance coverage decisions, using customer-level data from western Canada. I find that negative outcomes in the prior year significantly increase the likelihood of selecting higher coverage levels, while positive outcomes modestly reduce the probability of choosing higher coverage. In contrast, recent insurance claims have no independent effect once yields are accounted for. County-level yield outcomes appear to exert a stronger influence on coverage decisions than individual-level yields. However, coverage levels tend to revert toward their long-run average within two to three years following a negative yield event. I discuss potential mechanisms that drive these recency effects, including Bayesian learning and decision-making biases.