From Risk Transfer to Green Incentives: A Literature Review on the Impact of Policy-Supported Agricultural Insurance on Farmers’ Fertilizer Input Decisions

Abstract

Policy-supported Agricultural Insurance (PAI) profoundly influences farmers’ production inputs. Synthesizing empirical evidence from China, this paper identifies a paradigm shift in academic understanding from moral hazard to green incentive effects. Specifically, PAI promotes the reduction of chemical pesticides and the adoption of fertilizer-saving technologies by stabilizing income and acting as a substitute for traditional “self-insurance”. Crucially, environmental outcomes are contingent upon product design: high-protection schemes, such as full-cost and digital insurance, demonstrate significantly superior green incentives compared to traditional models, which may otherwise perpetuate moral hazard. Consequently, PAI has evolved from a mere risk transfer tool into a strategic policy lever coordinating food security with environmental sustainability. Future reforms should prioritize green product innovation, digital transformation, and elevated protection levels to accelerate agricultural green transition.