Somebody's watching me! Impacts of the spot check list program in U.S. crop insurance

Abstract

AbstractThe “Spot Check List” (SCL) is an important tool developed to help detect and deter fraud, waste, and abuse in the U.S. crop insurance program. This article examines whether the SCL program affects the extent of crop insurance losses and provides insights into the effectiveness of this program. Using proprietary, county‐level SCL data and panel data econometric procedures (which control for both observable and unobservable confounding factors), we find evidence that counties with more producers included in the SCL tend to have better actuarial performance (i.e., lower indemnity payment amounts) after these producers are informed about their listing on the SCL. In addition, the county‐level SCL effects tend to last for a couple more years beyond the initial year these SCL producers were informed of their listing. These results indicate that the SCL procedure has a notable impact on crop insurance losses and is a valuable tool for maintaining integrity of the program.