Policy Documents

Giving It Away Free: Free Crop Insurance Can Save Money and Strengthen the Farm Safety Net

Bruce Babcock –
April 2, 2012

The current crop insurance program provides premium subsidies that encourage farmers to buy more insurance -- and more expensive kinds of insurance -- than they would buy if they had to spend their own money. Crop insurance now goes well beyond protecting against unpredictable events that might destroy a crop. Now many farmers are using it as a form of "revenue insurance" to protect them against normal market fluctuations.

This study from Iowa State University economist Bruce Babcocke concludes the crop insurance program is so poorly structured that it would be cheaper to give free crop insurance that covered 70 percent of every farmer's yields than it is to run the program as currently structured.