Crop Insurance is a ‘Well-Run’ Public-Private Partnership

The role of federal crop insurance has grown significantly through the years and it is now the key risk management tool for farmers all across the country. With this greater role comes a greater responsibility to ensure the program is working as efficiently and effectively as possible.

Part of this responsibility includes making certain that when a farmer does suffer a verifiable loss and files a claim, the indemnity payment is processed quickly and sent to the right recipient with the correct amount. In other words, making certain that there are no improper payments. This is important for the farmer who is counting on timely assistance after a catastrophic event and it’s important for taxpayers who demand program integrity.

And, new data from the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) reveals that crop insurance stands as an example of a successful, properly-managed public-private partnership.

During the recent annual meeting of crop insurers, RMA administrator Brandon Willis announced that the error payment rate has improved by more than 50 percent from 5.5 percent in 2014 to 2.2 percent in 2015. By way of comparison, the average error rate government-wide was 4 percent.

“This demonstrates that the crop insurance program can withstand the scrutiny,” Willis said. “It’s a good story. It tells the story that crop insurance is a well-run program with an error rate far below the government average.”

An improper payment occurs when funds go to the wrong recipient, the right recipient receives the incorrect amount of funds, including being paid too much or too little, or the recipient uses funds in an improper manner. And, as Willis noted, many errors are simply rooted in data entry and reporting mistakes.

Perennial critics of farm policy have often cast crop insurance in a negative light pointing to any error payment rate as an excuse to cut, or even, gut the program. As a result, RMA, crop insurers, and even Congress have worked together to improve the error payment rate through the years.

In fact, as former RMA administrator, Kenneth D. Ackerman recently wrote in a blog post, “RMA’s eye-catching new 2.2 percent ‘improper payment’ rate for 2015 was no fluke. Rather, it was the product of a long-term commitment and years of work by a wide range of people who deserve credit for sticking to it.”

Going forward, the crop insurance industry will continue to work with stakeholders to ensure the accountability and integrity of this critical risk management tool that farmers and consumers rely upon to maintain a steady and affordable food and fiber supply.