News

Cap on crop insurance premiums could enhance risk management

A new study explores the impact of capping crop insurance premiums in the next farm bill.

North Dakota State University research professor David Bullock says he looked at 2022 farmer data and the economic consequences of a premium-to-liability ratio of four percent.

“Of course you’re going to have farmers probably shifting, that’s kind of the intention of the policy really is it would make it more affordable for farmers to shift up to a higher level of coverage. But trying to anticipate that is the trick, and we really haven’t got a good model yet to do that.”

He tells Brownfield the crop insurance system has been stressed in recent years because of an historically high amount of ad hoc disaster payments.

“It’s part of the reason why we try to strengthen crop insurance and have these other coverages like SCO is to try to shift more of that to more of an insurance-type program, which is more efficient for managing the risk than just trying to hand out outlays for ad hoc disaster.”

Bullock says the cap could incentivize farmers to allocate more of their acreage to higher coverage levels, which would enhance their risk management strategies.