A newly published academic paper by Francis Tsiboe and Dylan Turner of NDSU’s Agricultural Risk Policy Center finds that while federal crop insurance generally boosts farm revenues and reduces income volatility, its effectiveness depends greatly on the type of policy selected.
Published using data from the Federal Crop Insurance Program covering 11 major crops between 2011 and 2022, the study evaluates 51 combinations of insurance plans and coverage levels. The researchers simulate net indemnities — payouts minus out-of-pocket premium costs — and compare them to the baseline of being uninsured.
The results show that for every 1% increase in average revenue provided by an insurance policy, there is a corresponding 2.25% decrease in year-to-year income volatility. This suggests that indemnities generally arrive when farmers experience the greatest need.