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The Crop Insurance Industry’s Top Seven Whoppers

The Crop Insurance Industry’s Top Seven Whoppers

Tuesday, March 1, 2016


The crop insurance industry must be getting desperate.

The federal crop insurance program from which this industry profits handsomely is coming under increasing scrutiny. The industry’s claims to defend this bloated program are straying farther and farther from reality.

Here are the top seven whoppers the industry put out in two articles last month.

  1. The federal government “provides a discount” to farmers on crop insurance premiums. Taxpayers pay 62 percent of farmers’ crop insurance premiums. That’s not a discount, that’s a giveaway.
  2. "Crop insurance is not a federal handout." The federal government pays two-thirds of the premiums, covers most payouts to farmers and pays crop insurance companies to sell and service the policies. Net cost to taxpayers averaged $8.8 billion a year over the past three years. Sounds like a handout to us.
  3. The program “minimizes taxpayer costs.” Did we mention that taxpayers shelled out an average of $8.8 billion a year over the last three years?
  4. Crop insurance “works like other kinds of insurance.” Federal subsidies keep premiums so cheap that farmers regularly get back more in payouts than they paid in premiums. How much money have you made lately from your auto or homeowners insurance?
  5. Without crop insurance, the 2012 drought would have required “a very expensive ad hoc disaster bill.” Really? Crop insurance costs far more than ad hoc disasters. Between 1999 and 2008, insurance payouts were $11 billion more than disaster payments.
  6. The United States would not enjoy food security without crop insurance. Please. Crop insurance really didn’t get rolling until after 2000, when subsidies ballooned. In 1999, before the large increase in subsidies, farmers planted 328 million acres in principal crops. In 2015, 325 million acres were planted to the same crops. Subsidized crop insurance did not enhance American food security.     
  7. "Largely gone are the days of government support programs like direct payments." Congress did, finally, end direct payments in 2014, but lawmakers swapped it for two new government support programs, Agriculture Risk Coverage and Price Loss Coverage. The first year out of the gate, these two programs paid out $5.2 billion – more than direct payments would have cost.

The real story is that crop insurance has strayed far from what most people would recognize as a safety net for farmers facing potentially crippling losses because of bad weather. The crop insurance program has turned into just another income support program, with most of the support going to the largest and most financially-secure farming operations -- at a high cost to taxpayers and the environment.


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