Crop Insurance Design and On‐Farm Risk Adaptation
Abstract
ABSTRACT The United States spends billions annually on crop insurance premium subsidies, yet the prevailing distance‐based guarantee design unintentionally rewards risk‐taking by linking subsidies to yield variability. We consider a simple redesign: define guarantees in terms of probability so that coverage reflects a consistent likelihood of indemnity. Using US data, this probability‐based approach would reallocate about $3.3 billion in annual subsidies from high‐risk to low‐risk production, reducing regional disparities by two‐thirds without changing total subsidies. Because most publicly subsidized crop insurance programs around the world share this structure, adopting probability‐based guarantees could help realign agricultural production toward more resilient and sustainable regions and practices.
Fields of Study & Subjects
Agricultural risk and resilience
Climate change impacts on agriculture
Agricultural Economics and Policy
Publication details
- Journal / source
- Applied Economic Perspectives and Policy
- Publisher
- Wiley
- Volume
- 48
- Issue
- 4
- Pages
- 1244–1257
- Publication date
- 24 May 2026
- Language
- EN