The Effects of Premium Subsidies on Demand for Crop Insurance PDF Download

Author: United States Department of Agriculture
Publisher: CreateSpace
ISBN: 9781515032960
Category :
Languages : en
Pages : 30

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Book Description
The first 50 years of the Federal crop insurance program were marked by low enrollment levels. To boost program participation, legislation in 1994 and 2000 increased premium subsidies. In the years since, the jump in enrollment coupled with high commodity prices caused significant increases in program costs. This report examines the effects of premium subsidies on the demand for crop insurance across major crops and production regions. Findings show that while increases in subsidies can induce farmers to enroll more land, they primarily encourage them to adopt higher levels of coverage on land already enrolled. Midwestern and wheat producers are more responsive to changes in subsidies relative to other regions and crops. Findings suggest that changes to current premium subsidies have the potential to alter producers' reliance on crop insurance to help mitigate farm risk.

Author: Erik J. O'Donoghue
Publisher:
ISBN:
Category : Agricultural industries
Languages : en
Pages : 27

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Book Description

Author: United States Department of Agriculture
Publisher: CreateSpace
ISBN: 9781505400588
Category :
Languages : en
Pages : 30

View

Book Description
The first 50 years of the Federal crop insurance program were marked by low enrollment levels. To boost program participation, legislation in 1994 and 2000 increased premium subsidies. In the years since, the jump in enrollment coupled with high commodity prices caused significant increases in program costs. This report examines the effects of premium subsidies on the demand for crop insurance across major crops and produc-tion regions. Findings show that while increases in subsidies can induce farmers to enroll more land, they primarily encourage them to adopt higher levels of coverage on land already enrolled. Midwestern and wheat producers are more responsive to changes in subsidies relative to other regions and crops. Findings suggest that changes to current premium subsidies have the potential to alter producers' reliance on crop insurance to help mitigate farm risk.

Author: Alexa B. Verderosa
Publisher:
ISBN: 9781536152746
Category : Crop insurance
Languages : en
Pages : 263

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Book Description
Since its inception in 1938, the program has evolved from an ancillary program with low participation to a central pillar of federal support for agriculture. As the program has grownin types of insurance policies, breadth of crops covered, and millions of acres enrolledso has the cost of the program to the federal government. The first two chapters provide an overview of the federal crop insurance program. Chapter 3 focuses entirely on delivery subsides and explains how delivery subsidies are calculated, the limitations of publicly available data on the actual delivery expenses of Approved Insurance Providers (AIPs), and how AIPs spend delivery subsidies. In 2010, USDA negotiated an agreement with insurance companies to set a national cap on the annual payments it makes to them for expenses and a target rate of return. Chapter 4 examines (1) the changes in expense payments to companies due to the cap, (2) the extent to which the programs target rate of return reflects market conditions, and (3) opportunities for the federal government to reduce its delivery costs for the program. Before the Agricultural Act of 2014 cotton was eligible for most Federal farm programs. The 2014 Farm Act eliminated multiple programs, including the Direct and Countercyclical Program, while introducing several new programs, including the Supplemental Coverage Option (SCO), and Stacked Income Protection Plan (STAX). Chapter 5 focuses on the two new programs for cotton and examines the mechanics of the programs and their revenue impacts. Catastrophic coverage for noninsurable crops, known as the Noninsured Crop Disaster Assistance Program (NAP), has been available since the Federal Crop Insurance Reform Act of 1994. Chapter 6 examines the effects of the 2014 NAP policy change. Crop insurance premium subsidies are an important part of Compliance incentives under the 2014 Act. Farm program benefits under the 2014 Act could be as high or higher than under the 2008 Farm Act; but for individual farms, the shift toward a crop insurance-oriented policy could increase or decrease Compliance incentives as reported in the last chapter.

Author: Anne-Marie Fennell
Publisher:
ISBN: 9781457867606
Category :
Languages : en
Pages : 51

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Book Description
The federally subsidized crop insurance program helps about 1 million participants manage the risk inherent in farming. In recent years, the government's costs for the crop insurance program have increased substantially, and these costs have come under scrutiny as the nation's budgetary pressures have been increasing. Unlike farm and conservation programs, the crop insurance program provides the same level of subsidies to participants regardless of their income. This report examines: (1) the percentage and characteristics of participants that would be affected if premium subsidies were reduced for the highest income crop insurance participants; (2) the impact, if any, on the crop insurance program; and (3) how the U.S. Department of Agriculture (USDA) could implement a reduction in premium subsidies for the highest income participants. Tables and figure. This is a print on demand report.

Author: Jisang Yu
Publisher:
ISBN: 9781369310917
Category :
Languages : en
Pages :

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Book Description
Risk and uncertainty affect agricultural production and investment decisions. This dissertation investigates how farm production and investment respond to crop insurance availability and government subsidies. Chapter 2 develops a conceptual framework that describes effects of subsidized agricultural insurance on crop choices. The overall impact is illustrated as a sum of two effects: an actuarially fair insurance effect and a premium subsidy effect. The effects of premium subsidies are further separated into a direct profit effect and an indirect coverage effect. Premium subsidies affect crop choices by increasing profitability of the insured crop for a given quantity of insurance purchased and by encouraging farms to purchase more crop insurance, which also tends to affect crop choices. Under relatively general assumptions, Chapter 2 derives conditions for positive production effects of actuarially fair insurance and premium subsidies. Chapter 3 develops an empirical strategy to estimate effects of premium subsidies in the U.S. federal crop insurance program on planted acreage across field crops. Exploiting periodic policy changes, I estimate and identify the effects of the U.S. crop insurance premium subsidies on planted acreage of seven major field crops. The estimated results imply that a 10% increase in the premium subsidy causes about 0.43% increase in crop planted acreage, which is equivalent to an own-price elasticity of about 1.22. This is substantially greater than the estimated own-price elasticity, and supports the expectations from the conceptual framework in Chapter 2. Since conventional individual outcome-based crop insurance is too expensive to be implemented in many developing countries, index insurance is often considered as an alternative. Chapter 4 simulates production effects of the introduction of area-yield index insurance and embedded premium subsidies for rice farmers in Nepal. I illustrate how basis risk, which is the individual risk left uninsured by index insurance, affects demands for the insurance and potential production effects of availability of insurance and premium subsidies. From a retrospective survey of Nepalese farmers, the simulation results show how basis risk deters the production effects of area-yield index insurance and its premium subsidies.

Author: U.s. Government Accountability Office
Publisher: Createspace Independent Publishing Platform
ISBN: 9781973956273
Category :
Languages : en
Pages : 42

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Book Description
" Federally subsidized crop insurance, which farmers can buy to help manage the risk inherent in farming, has become one of the most important programs in the farm safety net. Revenue policies, which protect farmers against crop revenue loss from declines in production or price, are the most popular policy type and account for nearly 80 percent of all premium subsidies. The crop insurance program's cost has come under scrutiny while the nation's budgetary pressures have been increasing. GAO was asked to look at the cost of the crop insurance program. This report examines (1) trends in federal crop insurance costs and farm sector income and wealth from 2003 through 2012 and (2) the potential savings to the government and impacts on farmers, if any, of reducing federal premium subsidies for revenue policies. GAO analyzed USDA crop insurance program data and farm sector income and wealth data from 2003 through 2012 (most recent year with complete crop insurance data); reviewed economic literature and documents from stakeholders including farm industry groups and researchers; and interviewed USDA officials. "

Author: Nichole Manning
Publisher:
ISBN: 9781634835596
Category : BUSINESS & ECONOMICS
Languages : en
Pages : 150

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Book Description
Many farm policymakers generally consider the federal crop insurance program as the principal tool to help farmers cope with the variable impact of weather on crop yields. The program makes available subsidized policies that farmers may purchase each year to protect against yield and/or revenue declines during a particular growing season. Policies are available for about 130 commodities, covering crops supported by traditional farm programs (e.g., corn, wheat, and soybeans) as well as many fruits, vegetables, tree nuts, nursery crops, pastureland, and other commodities. Farmers pay a portion of the premium, unlike farm programs, which are free. Premium subsidies for federal crop insurance have been instrumental in expanding program participation to levels acceptable to policymakers. This book examines current premium subsidies, proposals to limit them, and potential options for Congress. Furthermore, this book examines trends in federal crop insurance costs and farm sector income and wealth from 2003 through 2012; and the potential savings to the government and impacts on farmers, if any, of reducing federal premium subsidies for revenue policies.

Author: United States Government Accountability Office
Publisher: Createspace Independent Publishing Platform
ISBN: 9781977960979
Category :
Languages : en
Pages : 52

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Book Description
The federally subsidized crop insurance program helps about 1 million participants manage the risk inherent in farming. In recent years, the government's costs for the crop insurance program have increased substantially, and these costs have come under scrutiny as the nation's budgetary pressures have been increasing. Unlike farm and conservation programs, the crop insurance program provides the same level of subsidies to participants regardless of their income. GAO was asked to examine the potential effects of reducing premium subsidies for the highest income crop insurance participants. This report examines: (1) the percentage and characteristics of participants that would be affected; (2) the impact, if any, on the crop insurance program; and (3) how USDA could implement a reduction in premium subsidies for the highest income participants. GAO analyzed RMA crop insurance data and FSA data on compliance with income limits from 2009 through 2013 (most recent year of available data), analyzed RMA data to examine the impact on the program and calculate potential savings, reviewed agency guidance and industry and academic publications, and interviewed USDA officials and stakeholders.

Author: Smith, Vincent H.
Publisher: Intl Food Policy Res Inst
ISBN:
Category : Political Science
Languages : en
Pages : 40

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Book Description
A central, but inadequately explored issue with respect to subsidized crop insurance programs concerns the costs of delivering insurance coverage to farmers. This study examines that issue in the context of the heavily subsidized US crop insurance program which has often been put forward as a model for agricultural insurance programs in other countries. US Government programs often rely on private firms to deliver income transfers or services, which then establish their own rent-seeking lobbies, which are shared with input suppliers. This rent dispersion process is examined in the context of the U.S. agricultural insurance industry, which receives as much as one third of the annual subsidies that support the federal crop insurance program. We find that as total payments to insurance companies increased between 2001 and 2009, an increasingly large share of the agricultural insurance industry’s rents accrued to insurance agents, although in markets where insurance companies possessed some oligopsony power, agent payments are smaller. The findings also suggest that the insurance industry (companies and independent agents) would almost surely provide the same service for substantially less than the gross revenues from the subsidies and underwriting gains they received.