The broiler chicken farming industry is one of the most critical agricultural subsectors contributing to the development and growth of rural areas in Iran, particularly in Fars Province. Since the initiation of agricultural insurance operations in 1983 in Iran, the Agricultural Products Insurance Fund has continually expanded its activities and diversified its services and tariffs. Although key objectives such as enhancing welfare and increasing production in operational units have been central to insurance policies, policyholders’ misunderstanding of the insurance mission has led to inefficiencies in achieving these goals. This study evaluates the effectiveness of insurance in improving the welfare of broiler poultry production units through increased output in rural areas of Fars Province.

The rural areas of Shiraz County in Fars Province were selected as the study region. Using a systematic stratified sampling method, 56 insured and 41 non-insured production units were chosen, and data were collected in 2023. To assess the impact of insurance, the production functions of insured and non-insured units were analyzed using Ramsey’s test to identify structural changes in the models.

The results revealed that insurance did not shift the production function but reduced its slope. Under these conditions, insured units incurred higher costs for chicks and feed but reduced expenditures on health and veterinary care. This outcome can be attributed to the presence of moral hazard in poultry insurance. Consequently, it is recommended that insurance contracts incorporate conditions mandating compliance with minimum health standards and offer premium discounts to units with favorable health records. Additionally, active monitoring and the classification of damages should be implemented to clarify responsibilities and the insurer’s share of compensation, ensuring transparency in the process.