The General Accounting Office (GAO) says the U.S. Department of Insurance could save millions of dollars by cutting the profits of private crop insurers. The report said it can be accomplished by cutting profits and putting a cap on payments that cover the administrative costs of the insurer. It also suggests the department take on more of the risk itself and share it with companies that have earned $240 million a year in every year but two since 1986.
The idea for the report came from California Democrat Sen. Dianne Feinstein. She wants to know how the government can save more money on the upcoming 2018 farm bill. And here’s why she’s interested.
A report issued earlier this year by the GAO said the crop insurance program will cost the federal government $7.9 billion from this year through 2026. The federal government — the report noted — pays most of the premiums with farmers paying about 38% on average.
All combined and totaled up, the GAO says between now and 2026 insurers will earn $1.3 billion in profits. That — the GAO noted — could be reduced by $364 million a year with no impact on the premium dollars paid by farmers and no impact on payouts for losses.
The report’s bottom-line said about a third of the costs to the federal government for the crop insurance program is subsidies to private insurers to take care of overhead. And that overhead — specifically mentioned — is 12,500 agents who write and service the policies for 1.2 million farmers.
That didn’t work for Feinstein who said, “Crop insurance is a vital piece of our farm safety net, but this analysis by GAO suggests that changes could be made to save taxpayer dollars and improve program efficiency for our farmers. It deserves full consideration by members of Congress.”
PIA National — and the independent insurance agents that sell crop insurance that belong to PIA — no doubt disagree with the GAO’s report that the income of the 12,500 agents selling crop insurance is overhead. It is earned and the contribution of those agents is important.
“The Federal Crop Insurance Program (FCIP) is a highly technical program that relies on the expertise of independent insurance agents. The FCIP provides our nation’s farmers with the ability to manage their risk and continue to produce a safe, strong, and dependable food supply,” PIA National says in its policy on crop insurance.
Agents have been delivering insurance for the federal government since the 1980s and to make the cuts Feinstein and the GAO might be thinking is not a good idea. “As the face of the FCIP, crop insurance agents work every day to deliver unprecedented financial protections, service, and value to farmers. By navigating through the technicalities inherent in the program, crop insurance agents help agricultural producers make sound risk assessments.”
Source links: Insurance Business America, PIA National