Agricultural insurance schemes affect how farmers respond to animal health crises, sometimes creating perverse incentives that undermine welfare outcomes.
Livestock insurance design has largely overlooked its effects on animal welfare outcomes. Insurance that pays only on mortality may reduce financial incentive to invest in veterinary prevention and care — if animals will be compensated anyway, the economic case for welfare investment weakens. Disease outbreak insurance that covers culling costs can incentivize rapid culling even when welfare-preserving alternatives exist. Redesigning agricultural insurance to include welfare outcome bonuses or prevention investment premiums could create financial incentives aligned with welfare goals, using market mechanisms to improve animal conditions at scale.