A new study from the Agricultural Risk Policy Center (ARPC) at North Dakota State University finds that routine, data-driven actuarial updates in the U.S. Federal Crop Insurance Program (FCIP) can substantially reduce taxpayer costs while preserving the program’s role in agricultural risk management.

The study, Routine Actuarial Adjustments Cut Taxpayer Cost in Subsidized Agricultural Insurance, authored by Dr. Francis Tsiboe, evaluates how annual updates to crop insurance rating parameters affect fiscal outcomes. Using more than 3 million observations across 32 U.S. commodities from 2001 to 2024, the analysis assesses the impact of both comprehensive and targeted actuarial adjustments on taxpayer expenditures.

The findings show that updating all ratemaking parameters reduces taxpayer costs by approximately 10% per year. Even larger savings, up to 15%, can be achieved by updating reference yields alone, highlighting their central role in aligning premiums with realized loss experience. While most states experience net fiscal savings from these updates, the magnitude of gains varies by region, reflecting differences in crop mix, production risk, and program scale.

The study also finds that comprehensive updates support overall program stability, while targeted adjustments can deliver greater cost savings without compromising actuarial soundness. These results underscore the ongoing challenge of balancing fiscal responsibility, actuarial accuracy, and consistency in a nationally administered crop insurance system.

“Routine actuarial updates play a critical role in strengthening the fiscal integrity of the Federal Crop Insurance Program,” said Dr. Tsiboe, Senior Research Economist and Program Leader at ARPC. “By improving the alignment between premiums and underlying risk, these updates help reduce taxpayer exposure while maintaining effective risk management tools for producers.”

The full study is published in Applied Economic Perspectives and Policy and is available at:
https://onlinelibrary.wiley.com/doi/10.1002/aepp.70052

Media Contact:
Dr. Francis Tsiboe — francis.tsiboe@ndsu.edu
Agricultural Risk Policy Center (ARPC)
North Dakota State University
www.ndsu.edu/agriculture/arpc