Farm-level choice of crop insurance coverage level: A preliminary assessment

The response of farmers to crop insurance incentives has been studied extensively. In particular, studies following the landmark ARPA legislation in 2000 have taken a close look at farmer participation changed with changes in the insurance subsidies. However, few if any studies have looked at the extent of farmer participation as measured in terms of their choice of coverage levels. This analysis uses farm-level observations of crop insurance choices to examine how changes to premium rates and subsidies may affect farmer choice of insurance coverage levels. Specifically we examine farmer choices of from a set of discrete coverage levels to changes in insurance premium subsidies that occurred in 2008 and 2009 while accounting for farm characteristics and market conditions. Some portion of the farmer choice of coverage levels were due to policy choices in the 2008 Farm Bill, whereas others were a result of significant price or other market changes between 2008 and 2009