GAO Says Government Should Cap Crop-Insurance-Premium Subsidies

Updated 4/13, 12:28 p.m.

NU Online News Service, April 12, 2:44 p.m. EST

The Government Accountability Office said today in a new report that the government should consider capping crop-insurance-premium subsidies for individual farmers or reducing subsidies for all farmers, or both.

In an example, the GAO report says that 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.

The report also says that the U.S. Department of Agriculture should accelerate the use of data-mining tools to prevent and detect fraud, waste, and abuse by either farmers or insurance agents and adjusters.

“GAO believes that when farm income is at a record high and the nation faces severe fiscal problems, limiting premium subsidies is an appropriate area for consideration,” the report concludes.

The report was requested by Sen. Tom Coburn, R-Okla. In a statement, he says, “This report shows that Congress could cap premium subsidies at $40,000 and save taxpayers $1 billion.”

He says high premium subsidies have hurt small and beginning farmers because the subsidies themselves have distorted the market.  For instance, he says, high subsidies have artificially increased the value of land and have created other barriers to entry and expansion.

“I applaud GAO for providing Congress with yet another way to save taxpayer dollars and reform government,” Coburn says.

Ironically, the report was issued as information surfaced that insurance agents are lobbying Congress to end caps on commissions imposed in the contract agreed to in 2011 that cut existing subsidies in the program by approximately 6 percent over 10 years.

Officials of the National Association of Professional Insurance Agents are trying to get the 2011 caps removed in the 2012 farm bill now being crafted by Congress.

Regarding the GAO report, Mike Becker, assistant vice president of PIA National, says, "We caution against additional cuts to federal-crop insurance. The program sustained multi-billion dollar cuts during the 2008 Farm Bill and additional multi-billion-dollar cuts during the most recent Standard Reinsurance Agreement. A continued array of cuts would lead to a derailed program causing catastrophic failure to America's agricultural safety net."

Becker adds, "When it comes to budget cuts, crop insurance has already done much more than its fair share."

Others in the industry sought to defend the current system. In a statement, officials of National Crop Insurance Services, Overland Park, Kansas, which represents crop underwriters, says, “The plan recently outlined by the GAO would adversely affect many of America’s full-time farmers.”

In addition, the statement says, “We fear it could prove particularly punishing to beginning and young farmers and other operators who are less likely to secure essential loans without adequate insurance coverage.”

Moreover, the NCIS officials say, “Having already shouldered more than $12 billion in funding reductions since 2008, the crop-insurance infrastructure must not be weakened further.

“As Congress writes the next farm bill, lawmakers should do no harm to crop insurance and keep rural America strong.”

Updated with PIA National comments.

Comments

Resource Center

View All »

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.