The percentage of total insurance premium volume in the United States accounted for by the federal government has been growing. The question arises as to the rationale for and the role the government plays in different insurance programs. This study considers five major rationales for government insurance programs: the residual market philosophy, the convenience motive, the need for compulsion, the motive of greater efficiency and the need to achieve collateral social purposes. The conclusion is that although not all government insurance is unjustified, some appears based on weak grounds. Not generally realized is how extensively the state and federal governments of the United States have become involved in the insurance business as an insurer, directly or indirectly. Much more attention has been given to the role of government as a regulator. However, both federal and state governments have steadily enlarged the scope of their insurance operations until the point has been reached that nearly half of the total insurance premiums collected in the U.S. represent government plans of different kinds. In 1960 it is estimated that the federal government collected about a quarter of total insurance premiums; this share rose to 39 percent in 1965, 42 percent in 1971 and to 44 percent in 1973. Aggregate data on all state government premium collections are not available, but these sums are substantial. If the trend continues, by about 1980,1 the federal government's share alone will exceed that of the private sector. Private insurers are concerned over government encroachment' and generally attempt to resist each new incursion. The objective of this paper is to review the nature and extent of federal and state insurance activity, to explore the rationale for government inMark R. Greene is Distinguished Professor of Insurance, in the College of Business Administration, The University of Georgia. He is past president of ARIA, a member of the Board of Governors of the International Insurance Seminars, Inc., and a member of and a former Director, Southern Risk and Insurance Association. He is author of Risk and Insurance 3rd edition, 1973, Risk Aversion, Insurance, and the Future, 1971, and Insurance Insights, 1974. Dr. Greene received the Journal of Risk and Insurance Award in 1963, 1964, 1965, 1972 and 1973. This article is the result of a paper presented at the 1975 Annual Meeting of ARIA in San Francisco. 1 Estimates are detailed in Table 5-1, Mark R. Greene, Risk and Insurance, 1st, 2nd, and 3rd Editions (Cincinnati, Ohio, South-Western Publishing Co., 1962, 1968, and 1973, respectively). The 1975 estimate is derived in this paper.