Crop Insurance

Congress significantly expanded the federal crop insurance program between 1981 and 1990, but it sustained more than $2.3 billion in underwriting losses for the period because farmers' premiums were not actuarially sound. At the same time, growing private-sector involvement in the program has meant handsome profits for insurance companies--they earned underwriting gains of more than $100 million during the 1980s--with very little risk attached. Poor oversight over reinsured companies, particularly in the area of claims adjustments, has resulted in millions of dollars in overpayments. Finally, a major congressional objective--to make crop insurance the preeminent means of providing agricultural disaster assistance--has not been achieved. Other forms of agricultural disaster assistance represented 76 percent of all assistance during the 1980s. Several alternatives and variations to the current program have been proposed recently. In the final analysis, Congress will have to weigh the benefit of protecting farmers from hardship and the cost of this protection.