How a Safety Net Became a Farm Policy Disaster: White Paper No. 1
Federal crop insurance is the single largest agricultural program, measured by funding, delivered by the U.S. Farm Bill. This program is projected to cost $90 billion over the next 10 years.
There’s big money in crop insurance, which is why major corporations such as Wells Fargo, John Deere and Archer Daniels Midland are involved in this industry. These corporations receive reimbursements for administrative costs and ensure themselves large profits by off-loading the riskiest policies to the federal government. They also benefit from an artificially created market, initiated and maintained by huge public subsidies that decrease the cost of insurance premiums for farmers. This subsidy has radically expanded the number of farmers and acres enrolled in crop insurance, thus guaranteeing a huge and expanding clientele for these private corporations.
Between 2003 and 2012, the federal government spent $42.1 billion in premium subsidies, $12.5 billion in administrative reimbursements and $4.1 billion on underwriting losses and additional costs — a tax funded total of $58.7 billion. These public dollars are going to already wealthy corporations — top ranked insurer Wells Fargo had $1.4 trillion in assets in 2013, while second-ranked insurer Ace reported $2.7 billion net income in 2012.
“Crop Insurance — The Corporate Connection” is the first of three white papers authored by the Land Stewardship Project. In this paper, we take a look at the money taken in by the crop insurers themselves, how the system works, and who takes on risk and who doesn’t.
Main points of this White Paper
- There is significant disconnect between the massive profits crop insurance corporations enjoy and the risks they take on.
- There is little systematic accountability to make certain an insurance company’s administrative costs match the amount of tax money it receives for administrative reimbursement.
- Profit margins for crop insurance companies far exceed what is considered a reasonable rate of return for crop insurers.