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A Call for Crop Insurance Limits

April 27, 2012
By: Jeanne Bernick, Top Producer Editor
crop insurance
  
 
 

 

The Government Accountability Office (GAO) is now recommending that in order to reduce crop insurance program costs, "Congress should consider limiting premium subsidies for individual farmers, reducing subsidies for all farmers, or both."
 
The recommendation is part of a GAO report on federal crop insurance.
 

What GAO Found

If a limit of $40,000 had been applied to individual farmers’ crop insurance premium subsidies, as it is for other farm programs, the federal government would have saved up to $1 billion in crop insurance program costs in 2011, according to GAO’s analysis of U.S. Department of Agriculture (USDA) data.
 
GAO selected $40,000 as an example of a potential subsidy limit because it is the limit for direct payments, which provide fixed annual payments to farmers based on a farm’s crop production history. Had such a limit been applied in 2011, it would have affected up to 3.9 percent of all participating farmers, who accounted for about one-third of all premium subsidies and were primarily associated with large farms.
 
For example, one of these farmers insured crops in eight counties and received about $1.3 million in premium subsidies. Had premium subsidies been reduced by 10 percentage points for all farmers participating in the program, as recent studies have proposed, the federal government would have saved about $1.2 billion in 2011. A decision to limit or reduce premium subsidies raises other considerations, such as the potential effect on the financial condition of large farms and on program participation.
 
National Crop Insurance Services Inc. (NCIS) fears the GAO measures would "adversely affect many of America’s full-time farmers" as well "prove particularly punishing to beginning and young farmers" who struggle to find operating loans without insurance coverage.  The organization emphasized the public-private partnership designed to deliver crop insurance, which was done in a way to limit taxpayer risk exposure by shifting much of it to private business
 
Read the full GAO report.
 
 

Related Video Report :

Jamie Wasemiller of the Gulke Group, says crop insurance is extremely helpful in managing the risks associated with crop production. Listen in as he provides insight for future insurance decisions.

 

 

 

 

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COMMENTS (3 Comments)

TOM - KENNEWICK, WA
We have to ask ourselves what the purpose of the insurance programs are and why the government is involved in it, and the reason is to keep as many family farms in business as is feasible by giving them a way to protect themselves from being wiped out by a single bad year.

The reason is to keep providing good clean and safe food in a way has the person working the land in a stewardship position rather than a bunch of hirelings who are seeking maximum profit without a thought to what the long-term implications of certain practices are.

Ultimately this keeps the price of food down as well as family farms often end up working for free or for less than minimum wage in bad years. It is also where a large number of our future military and small business owners come from.

The insurance program is better than the old disaster relief programs which didn't require anything from the farmer other than to show up with their hand out every time there was a crop failure.

At a bare minimum there should be a limit to how much each farmer gets (farmer being defined as anyone who has at least 10% ownership and farms full time or any couple that is 50% or more owner with any level of participation)

Also there should be a cap for how much each farm should get in subsidy, and especially with sectors that have done well the subsidy should be lowered or removed for the next year.

Also any program should include an aspect of crop and income record so guys who try to cheat the system only hurt themselves. So if you ruin your crop on purpose it brings down the average you can insure for for the next 3 years. Also if it can be demonstrated you acted in bad faith the private provider should be able to boot you from the program and withhold payment or reduce it.
12:49 PM Apr 30th
 
Smallest Dairy Farmer
Let Private Insurance offer crop insurance to farmers. Insurances can pay for their expenses, like in any other kind of insurance sales. Does everything have to be so complicated? Insurance Companies don't need to be subsidized to sell insurance. All they need to do is offer a good product as a reasonable expense to the customer as determined by the market. Compete for the business.
I think, that if the Government needs to be involved at all, why not just tax insurance companies’ net profits at a much lower low rate for the policies they do sell to farmers. Let them sell what they want for all different needs & coverage’s. Keep it simple I think that if a farm is either unlucky enough or otherwise we need to go back to actual yield history rather than falling back on county averages when there are consecutive losses for whatever reasons. Go back to emergency help if the Congress so determines it is appropriate. They are elected officials.
The way it is now, is ripe for marginal farming & decreased commitment. Let the insurances with no government involved decide what to types of policies to offer at what prices. Keep it simple again! What's wrong with just paying for whatever the average price grain price is at the time the loss occurred (as hail) or when it is confirmed when it is a yield loss. Again let companies decide all these things & offer the best policy they each can for the lowest cost. Compete with each other for the business of their clients.
Government could help by taxing company profits lower that come from crop insurance sales to encourage Companies to offer Crop Insurance.
Government can help by requiring, that adjusters serve as a private independent groups who charge fees that are in no way attached to the results of the outcome of the adjustment. They should be an independent group of professional s that pay their own travel & expenses as well. This should be a part of compensation that is not connected in any way to outcome for either of the parties. Insurance would have to figure whatever adjusters cost of hiring in their assessment of policy pricing independent of outcome. There should be no opportunity to game the system on anyone’s part.
Think of the billions that would save Government. That’s a pretty small role for Government to play compared to the fraud ripe boondoggle we have now! I think the GAO would approve.

11:43 AM Apr 28th
 
hayman - IL
Good to hear the GAO wants farmers to become more responsible. Been a disgrace to know some farmers have been milking the system for all they can. Planting too early, intentionally not planting or fertilizing properly,adjusting yields for maximum insurance money. Used to be farming was a completely above board occupation, but it sure has changed with this free money from the government.
2:12 PM Apr 27th
 



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