Premium Subsidy Changes and Demand for Crop Insurance

Crop insurance is widely used on major crops raised in the Northern Plains. Prospective reductions in the crop insurance premium subsidy are commonly expected to result in lower use of insurance. Corn and soybean producers in South Dakota responded to the shift in subsidy levels beginning in 2001 by shifting toward revenue products and higher amounts of insurance. Producers chose a product type depending on the size of the revenue price election level, relative yield and premium rate. Producers chose an amount of liability depending on the relative yield, acres insured, revenue price election level and premium rate