The
federal crop insurance program, administered by the U.S.
Department of Agriculture, is meant to protect farmers from
financial losses after natural disasters or other events that
result in crop losses or price declines.
The USDA worked with 13 privately held insurance companies to
provide 1.2 million crop insurance policies at a cost of $17.3
billion in 2022, said the report from the Government
Accountability Office (GAO).
From 2011 through 2022, the federal government paid about $36.6
billion to the insurance companies, about a third of the
program's total cost of $107.7 billion, the GAO said.
During that time, the companies' underwriting gains, or profits,
averaged $1.4 billion annually and their rate of return was
nearly 17%, compared with a market rate of around 10%. USDA's
target rate of return negotiated with insurers is 14.5%.
"This GAO report shows that a shocking proportion of the
subsidies intended to support the cost of writing crop insurance
policies for all farmers are being eaten up by companies and
agents," said U.S. Senator Cory Booker, a Democrat, who
requested the GAO report.
The GAO said that adjusting the rate of return closer to market
rate and reducing subsidies for the highest-income farmers would
together save the government hundreds of millions of dollars.
To do so, the GAO recommended that Congress repeal a provision
of the 2014 farm bill that stipulates any change to crop
insurance agreements cannot reduce insurers' underwriting gains.
USDA declined to comment.
Crop insurance costs are rising as climate change worsens, a
2022 report by the Environmental Working Group found.
(Reporting by Leah Douglas in Washington; Editing by Matthew
Lewis)
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