Subsidy Design for Agricultural Insurance at Scale

Agricultural production in the Philippines is highly exposed to weather and climate shocks, creating large income risks for smallholder farmers. The government has responded by providing fully subsidized (free) agricultural insurance to registered farmers nationwide for over a decade through the state-owned Philippine Crop Insurance Corporation (PCIC). The program covers around 2.4 million farmers, but it is increasingly costly and oversubscribed, leaving many eligible smallholders uninsured. Additionally, while RCT evidence shows that premium subsidies can increase coverage and benefit recipients, it is unclear whether these gains continue to outweigh the fiscal costs and potential behavioral distortions when delivered at scale.

Given these challenges, PCIC has asked this project to assess whether premium subsidies could be reduced and/or better targeted to improve fiscal sustainability, inclusivity, and overall value for money. To address this question, the project will generate three types of evidence. First, using a willingness-to-pay exercise, we will estimate farmers' demand for insurance, how many would remain uninsured at full premiums, and the subsidy levels needed to induce take-up among different groups. Second, by embedding a randomized policy pilot within PCIC's rice insurance program, we will measure how subsidy generosity affects coverage, production decisions, and agricultural losses over two seasons, and whether more generous subsidies increase risk-taking. Finally, combining these results, we will simulate the fiscal and social implications of alternative subsidy policies and provide PCIC with clear, policy-ready options to guide reform at scale.