{"id":12640,"date":"2021-03-18T11:32:05","date_gmt":"2021-03-18T16:32:05","guid":{"rendered":"http:\/\/72.52.184.4\/~cropinsuranceina\/?p=12640"},"modified":"2021-05-03T11:34:08","modified_gmt":"2021-05-03T16:34:08","slug":"crop-insurance-basics-incentives","status":"publish","type":"post","link":"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-incentives\/","title":{"rendered":"Crop Insurance Basics: Incentives"},"content":{"rendered":"

When policymakers prioritize specific behaviors or actions, they usually turn to incentives to jumpstart the process.<\/p>\n

For example, the U.S. government has long promoted the benefits of homeownership to individual families and the economy as a whole. Hence, lawmakers introduced mortgage interest deductions on income tax filings to make homeownership more affordable and attractive.<\/p>\n

In the world of agriculture, the public-private crop insurance system is often used as an incentive vehicle.<\/p>\n

It\u2019s helpful to think of crop insurance incentives in two buckets. The first bucket is using reductions in a policy\u2019s premium rate to incentivize desired behavior. But with insurance, the key is not to incentivize in a way that upsets the delicate actuarial balance<\/a> of the system, which could inadvertently do more harm than good.<\/p>\n

For example, it would be inappropriate or unsound to arbitrarily discount premiums to promote an action without actuarial and financial justification \u2013 doing so could negatively affect coverage levels and\/or drive up premiums for other farmers to offset resulting losses.<\/p>\n

So, policymakers designed crop insurance with a self-correcting feature that naturally discounts premium for any producer who improves their performance. This catch-all incentive rewards any behavior that increases yields and reduces risk for farmers and taxpayers.<\/p>\n

Take conservation for example. Farmers are turning to conservation practices like no-till more and more because those practices lower production costs and improve soil health which over time can lead to increased yields.<\/p>\n

Through crop insurance\u2019s incentive known as Actual Production History or APH, those farmers with above average yields are naturally rewarded with lower premiums.<\/p>\n

The second incentive bucket works differently. In it, policymakers don\u2019t adjust or discount premium rates. Instead, they offset a higher percentage of the farmer\u2019s overall share of the premium costs.<\/p>\n

This protects the actuarial soundness of the crop insurance system while providing additional financial incentives to help farmers who are willing to adopt preferred behaviors.<\/p>\n

In recent Farm Bills, Congress wanted to encourage people to get into farming. To do this, the government agreed to offset a higher percentage of insurance premiums for new and beginning farmers as well as military veterans looking to break into farming.<\/p>\n

Some states offer this second kind of incentive, too. In Iowa and Illinois, growers can get additional help paying their insurance premiums if they agree to plant cover crops \u2013 a conservation practice that helps sequester carbon, reduce soil runoff, and improve soil health.<\/p>\n

These state pilot programs \u2013 although small \u2013 have proven to be very popular with farmers and have achieved the states\u2019 goal of adding cover crop acreage.<\/p>\n

Best of all, once this cover-cropping technique starts improving overall farm yields, it is rewarded with a higher APH and lower premium rate, falling within the first-bucket incentive, which will only encourage even higher levels of participation.<\/p>\n","protected":false},"excerpt":{"rendered":"

When policymakers prioritize specific behaviors or actions, they usually turn to incentives to jumpstart the process. For example, the U.S. government has long promoted the benefits of homeownership to individual […]<\/p>\n","protected":false},"author":22,"featured_media":12642,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,25],"tags":[],"class_list":["post-12640","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-insight","category-whats-cropping-up"],"yoast_head":"\nCrop Insurance Basics: Incentives - Crop Insurance Keeps America Growing<\/title>\n<meta name=\"description\" content=\"It\u2019s helpful to think of crop insurance incentives in two buckets. The first bucket is using reductions in a policy\u2019s premium rate to incentivize desired behavior. 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