Crop Insurance Unit and Adverse Selection

Carl Zulauf, Bruce Sherrick, Jonathan Coppess, Nick Paulson and Gary Schnitkey

farmdoc daily, 2025, vol. 14, issue 92

Abstract: Among farmers’ crop insurance decisions is the unit of insurance. A key consideration is likely to be the insurance unit’s return to farmers, which in this study is measured as the ratio of indemnity payments to farm-paid premium. Since 2010, this payment-to-cost return has been higher for enterprise than for basic and optional units, the three most widely-used insurance units. This finding is consistent with the public policy decision to subsidize enterprise units at a higher rate and with the notable increase in its share of insured acres. Nevertheless, the study raises an important policy question, “Should public subsidy rates be more differentiated across insurance units?”

Keywords: Agribusiness; Farm Program Analysis and Outlook; Premiums and Payouts; Risk Management (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:illufd:358514

DOI: 10.22004/ag.econ.358514

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