Crop insurance 2022 in review and call for participants for a crop insurance survey
The Federal Crop Insurance Program plays an important role in how Midwestern farmers manage yield and price risk. As the deadline for purchasing crop insurance for the 2023 crop year is approaching, it might be helpful to take a closer look at the program from both big-picture and individual-level perspectives.
Corn insurance policy choice in 2022
Based on RMA’s Summary of Business data for 2022, Table 1 reports the number of corn crop insurance policies sold by type in the 2022 crop year. Corn growers in the 12 Midwest states (IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI) predominately chose Revenue Protection (RP) policies to insure their corn. These policies accounted for over 92% of the corn policies sold in 2022. This share was even higher at 95% for Iowa alone. The RP with Harvest Price Exclusion (RP-HPE) policies and Yield Protection (YP) policies had respective market shares of only 0.58% and 5.84% in the Midwest and 0.85% and 3.16% in Iowa. Other corn policies, which are based on either county average corn revenue (Area Revenue Protection, ARP), county average corn yield (Area Yield Protection, AYI), or county average net corn revenue (Margin Protection, MP; MP-Harvest Price Option, MP-HPO), made up less than 2% of total corn policies sold in 2022 in either the Midwest or Iowa.
Corn insurance policy endorsement choice in 2022
Table 2 reports the number of corn policy endorsements sold in 2022. Overall, Midwestern corn growers showed little interest in the endorsement products. Among all corn growers in the 12 Midwest states, the endorsement product sold most was the Supplementary Coverage Option – Revenue Protection (SCO-RP). But the number of SCO-RP endorsements sold as a percent of the number of RP policies sold was only 4.3%. For Iowans, this percentage was only 2.7%. Iowans show a slightly stronger interest in another endorsement product, the Enhanced Coverage Option – Revenue Protection (ECO-RP), but the number of ECO-RP endorsements sold as a percent of the number of RP policies sold was just 3.1%. The new endorsement product, Post-Application Coverage Endorsement (PACE), first introduced in 2022 for corn growers that split nitrogen application before and after planting, was purchased by less than 0.02% of the underlying RP corn policyholders.
Insurance unit type choice of RP corn policies sold in 2022
Table 3 reports the acres covered by each insurance unit type of the RP corn policies in 2022. We only report the RP policies as RP made up over 90% of crop insurance policies sold in 2022. Among Midwestern corn growers, the Enterprise Unit (EU) was the most popular insurance unit in 2022. It covered about 67% of all the RP policyholders’ corn acres. Optional Unit (OU) covered about 21% and Basic Unit (BU) covered 12%. Corn growers showed little interest in the Whole Farm Unit (WU) type as it covered only 12,268 acres. For Iowa, EU covered 61% of the RP policyholders’ corn acres, OU covered 24%, and BU covered the remaining 15%.
Call for participants for a crop insurance survey, compensation offered
Results based on the program participation data show some important patterns in corn growers’ crop insurance choices. For example, corn growers have a strong preference for insuring against both the yield risks and price risks than yield risks alone (RP vs. YP), and generally prefer to insure all corn acres under one insurance policy than under multiple policies (EU vs. other insurance unit types). However, these results also reveal significant heterogeneities among corn growers’ insurance choices, especially in the coverage level choices. Questions arise about what factors drive each individual farmer’s insurance choice and whether farmers making different choices are all making the best use of the Federal Crop Insurance Program.
Crop insurance can be a very personal choice depending on each farmer’s specific farm operation. A non-exhaustive and overlapping list of possible factors includes:
- Perceptions about soil condition, weather, and price risks.
- Risk tolerance levels with those potential risks.
- Premium and subsidy levels for each potential coverage level.
- The likelihood of receiving an indemnity payment for the chosen coverage level.
- Past experience with crop insurance policies.
- Agent recommendations and friend suggestions.
A farmer’s crop insurance decision is usually a combination of the above factors. The underlying decision-making processes are not, however, reflected in the program participation data. To understand how farmers make crop insurance decisions and related impacts on farm operation, researchers (led by Dr. Hongli Feng) at Iowa State University, Kansas State University, Michigan State University, and the University of Illinois Urbana-Champaign are conducting a short survey.
The survey takes about 30 minutes to complete and contains questions about crop insurance usage, crop insurance decisions in given scenarios, and basics of the farm operation. If you complete the survey then the research team will send you an Amazon gift card. Gift card values range from $50 to $99 with an average value of $71.
To participate in the survey, please scan the QR code below or go to https://bit.ly/crop-ins-survey. This survey will enhance the two-way knowledge flow between farmers and researchers as the data will be utilized in research to generate insights that could better serve farmers. Your input will be invaluable to the research on farmers’ crop insurance decision making and to identify any potential measures that can help farmers make the best use of the Federal Crop Insurance Program.
Hongli Feng, Endowed Professor for Excellence in Agricultural Economics, Iowa State University Department of Economics, firstname.lastname@example.org