Crop Insurance Companies “Crying Wolf” on Budget Deal
WASHINGTON - The decision by Congress to cut the government-guaranteed profits of crop insurance giants will not “cripple” the industry, as some crop insurance companies claim.
Contrary to industry complaints, the companies that benefit from the heavily subsidized federal crop insurance program make huge profits, pay their top executives millions of dollars annually and can easily afford to pull in their belts, according to a new analysis and interactive map by EWG.
The Congressional budget deal that President Obama signed into law Nov. 2 is projected to generate $3 billion in savings for the taxpayers over the next 10 years. Lawmakers say they can achieve these savings by reducing the target rate of return for crop insurance companies from 14.5 percent to 8.9 percent, a profit margin that is still generous and well above the rate of return enjoyed by the insurance industry as a whole.
“The savings laid out in the budget translate to a total of $300 million a year for the 17 companies selling subsidized crop insurance,” said Anne Weir, co-author of the analysis and EWG senior analyst of economics. “This number may sound like a lot of money, but taken in the context of the huge profits made by these companies and the salaries of their CEOs, it’s a drop in the bucket. Still, it amounts to a win for taxpayers.”
EWG found that 12 of the 17 companies approved to sell subsidized insurance are owned by larger corporations whose net worths range from $4.4 billion to $281 billion. The chief executive officers of these parent companies are paid between $468,000 to $22.1 million annually. Seven of those companies are headquartered in Australia, Bermuda, Canada, Ireland, Japan or Switzerland.
A recent EWG report on crop insurance debunks the industry’s frequent argument that crop insurance is less costly than ad hoc disaster relief bills. A bill recently introduced in Congress would cut the bloated crop insurance program even further.
Now, these crop insurance companies and their advocates are attempting to avoid the cuts to their government-guaranteed profits by encouraging Congress to find the savings from other programs in the appropriations process.
“It’s ludicrous for these companies to claim that the Congressionally mandated reduction in their guaranteed profits would cripple the crop insurance program and hurt the rural economy,” Weir said. “Lawmakers should hold firm to their original decision to seek taxpayer savings from the huge profits flowing to some of the largest and most profitable companies on the planet.”