NCPA - National Center for Policy Analysis

The Crop Insurance Fiasco

March 16, 2000

Congress supposedly ended 60 years of annual ad hoc crop disaster assistance in 1994 and replaced it with enhanced crop insurance delivered through the private sector and backed by the Treasury.

The result, experts say, has itself been a disaster.

  • From 1995 to 1998, taxpayers shelled out $5.5 billion for crop insurance, while farmers chipped in only $3.4 billion.
  • One large private insurer earned $30 million on $61 million in premiums in 1998.
  • A Department of Agriculture audit uncovered one insurance agents who pocketed $136,000 in 1996 sales commissions while on the payroll of a tomato grower who collected $1 million that year in government insurance payouts.
  • In addition to insurance subsidies, Congress forked over $6 billion in emergency aid in 1998 and another $9 billion last year to help farmers cope with droughts and falling grain prices.

Such fiascoes have led some observers to question why the government should be in the crop insurance business in the first place. It doesn't sell fire insurance.

Source: Brandon Copple, "Insuring Failure, Forbes, March 20, 2000.

 

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