Welcome to Pocket Science: a glimpse at recent research from Husker scientists and engineers. For those who want to quickly learn the “What,” “So what” and “Now what” of Husker research.
What?
Crop insurance plays a critical role in agricultural risk management by providing financial protection when disasters such as flooding, hail or fire occur. It is also a large part of the spending in the Farm Bill, as the federal government subsidizes the premiums producers pay.
Understanding producer behaviors around crop insurance and aligning federal policy with those behaviors is important to maximize the effectiveness of crop insurance and encourage participation to match actual risk exposure.
So what?
A new study from University of Nebraska–Lincoln agricultural economists suggests crop insurance could be strengthened by better accounting for producer risk attitudes and regional risk exposure. Researchers Charalampos Mavroutsikos, Konstantinos Giannakas and Cory Walters used data from a 21-year period to model crop insurance choices and outcomes.
They found that producers’ insurance choices and the economic impact of crop insurance hinge largely on risk tolerance, risk exposure and premium costs. The analysis finds that keeping current policies in place would widen regional disparities in crop insurance benefits.
Now what?
The authors suggest the model could help policymakers, interest groups and researchers refine crop insurance, making it more efficient and effective by encompassing diverse risk profiles.
Producer premiums, along with risk attitudes, are the key drivers of coverage decisions. Varying subsidy rates by crop and region could give policymakers greater flexibility to boost crop insurance participation.
