Crop Insurance: Protecting America’s Food Supply
In 2015, the Federal Crop Insurance Program protected more than $102 billion of America’s food supply, with 90 percent of insurable farmland in the U.S. being covered by 1.2 million policies on more than 120 individual crops. Crop insurance is the linchpin of the federal safety net for America’s farmers and ranchers.
Crop insurance enables farmers to borrow money to expand and improve their businesses. Bankers rely on crop insurance to reduce the risk of their loans to farmers. Crop insurance also provides the security that enables farmers to forward market their crops.
Crop insurance makes America’s farmers and ranchers world leaders in agriculture, allowing producers to stay competitive and be more innovative. It also helps them sleep better at night knowing that should the unexpected happen, they will have the financial security to stay in business and go on to plant the next season.
More than ever before, our farmers are being asked to produce more products and achieve higher yields. Agricultural crops for food, feed, fiber and fuel are in great demand both domestically and abroad. New technology, innovation, access to capital and affordable risk management have allowed America’s farmers to meet the demands placed upon them. A vibrant Federal Crop Insurance Program is a key component to the tremendous success of our country’s agricultural economy.
Federal Crop Insurance Milestones:
1938: Congress approved the Federal Crop Insurance Act which established the first Federal Crop Insurance Program.
1980: Congress passed legislation that was designed to increase participation in the Federal Crop Insurance Program and make it more affordable and accessible. This modern era of crop insurance was marked by the introduction of a public-private partnership between the U.S. government and private insurance companies. Bringing the efficiencies of a private sector delivery system together with the regulatory and financial support of the federal government formed the basis of a new and innovative approach to solving a long-standing problem.
1994: The Federal Crop Insurance Reform Act of 1994 dramatically restructured the program, creating incentives designed to increase participation.
1996: The Risk Management Agency (RMA) was created in the U.S. Department of Agriculture to administer the Federal Crop Insurance Program.
1998: More than 180 million acres of farmland were insured under the program, representing a three-fold increase over 1988.
2000: Congress approved the Agricultural Risk Protection Act (ARPA). The provisions of ARPA made it easier for farmers to access different types of insurance products including revenue insurance and protection based on historical yields. ARPA also increased premium subsidy levels for farmers to encourage greater participation and included provisions designed to reduce fraud, waste and abuse.
2007: 82 percent of insurable farmland in the U.S. worth $67 billion in crop value was protected through the 1.3 million federal crop insurance policies, insuring more than 100 individual crops on more than 271 million acres.
2008: Due to the rising prices of commodities such as corn, soybean and wheat, the value of all crops insured under the Federal Crop Insurance Program in 2008 reached a record $90 billion. Because premium prices are directly related to crop values, the crop insurance industry experienced greater increased potential risk exposure.
2009: Even though the industry was just beginning to deal with the consequences of the $6.4 billion cut in program funding from the 2008 Farm Bill, the program paid out over $5.2 billion in indemnity payments to insured farmers in 2009. Once again, the public-private partnership worked together to protect rural America’s farmers and ranchers.
2011: Following yet another $6 billion in funding reductions through the renegotiated 2011 Standard Reinsurance Agreement (SRA), the crop insurance industry provided more than $113 billion in protection to America’s farmers and ranchers. Crop insurance indemnity payments exceeded $10 billion in 2011 due in large part to severe droughts in the southern plains, hard freezes in Florida, flooding along the Mississippi and Missouri Rivers, and tropical storms in the South and Northeast.
The Importance of Crop Insurance
Crop insurance provides a safety net against the inherent risks and potential for widespread catastrophic losses associated with agricultural production. It must respond to the complexities of the marketplace and the exacting requirements of the USDA and state-level insurance regulators. Insuring agriculture is a complicated business. It is not the same as insuring a house, or a car, or a boat. Crop insurance enables farmers to borrow money to expand and improve their businesses, as well as have the security that enables them to forward market their crops.
- In 2015, crop insurance protected more than $102 billion of America’s food supply.
- In 2015, more than $5.7 billion was paid in crop insurance indemnities.
- In 2015, 90 percent of insurable farmland in the U.S. was protected through 1.2 million federal crop insurance policies, insuring more than 120 individual crops on more than 288 million acres.
How the Federal Crop Insurance Program Will Keep America Growing
With tightening credit in the agricultural economy, volatile commodity prices and the ever-present severe weather events, the Federal Crop Insurance Program is of greater importance now than ever before.
- The Federal Crop Insurance Program is not static. It is constantly evolving to meet the needs of today’s agricultural producers and it is performing at a high level. It is essential to maintain the current level of funding so that the program can continue to provide a measure of stability in an increasingly unstable economic climate.
- The crop insurance industry is working with its partner, the Risk Management Agency, to improve the program so that we are able to meet challenges and protect the American farmer, which we know is in all of our best interests.
- By working with our USDA partners, the crop insurance industry works hard to maintain the integrity of the program.
- While the industry continues to work to protect the program against fraud, the rate of fraud in the crop insurance industry is very low. According to Dr. Bert Little of Tarleton State University, it is less than one-half of one percent. Fraud rates in other lines of insurance, such as property and casualty, are significantly higher.
- Employing sophisticated technology — such as data mining and satellite imaging — the RMA and the industry have been working together to detect problems and prosecute those who attempt to defraud the program. Our industry has a zero tolerance for fraud.
Dr. Thomas P. Zacharias, President
Dr. Zacharias joined NCIS in July of 1990. He holds a Ph.D. in Agricultural Economics from the University of Illinois, with B.S. and M.S. degrees in Agricultural-Economics from Texas A&M University. Prior to NCIS, Dr. Zacharias was an Associate Professor in the Department of Economics at Iowa State University in Ames, Iowa. Dr. Zacharias also served as an Assistant Professor in the Department of Agricultural Economics at Louisiana State University in Baton Rouge, Louisiana. At Iowa State University, Dr. Zacharias held an extension appointment with farm and risk management responsibilities which included extension workshops and schools for crop insurance and marketing. At Louisiana State University Dr. Zacharias held a research and teaching appointment with responsibilities in farm management and production economics. Dr. Zacharias taught graduate and undergraduate courses in farm management, production economics, and quantitative methods.
Dr. Zacharias has published three book chapters, twelve refereed journal articles, three book reviews in peer-reviewed journals, and over 75 other publications, including numerous professional and agricultural extension presentations. In 1993, Dr. Zacharias co-authored a paper published in the 1993 Casualty Actuarial Society Forum entitled, “Crop-Hail Insurance Ratemaking.” He has co-authored a paper entitled, “Ratemaking Considerations for Multiple Peril Crop Insurance,” published in the Winter, 2000 Casualty Actuarial Society Forum.
Since 1990, Dr. Zacharias has worked exclusively in the area of crop insurance including both public sector and private sector involvement. His university experience focused on farm management and production economics with a primary emphasis on risk management.
Dr. Zacharias has also been an invited speaker at reinsurance seminars, commodity association meetings, as well as international insurance association meetings.
Laurence M. Crane, Ph.D., Vice President, Program Outreach and Risk Management Education
Laurence Crane is Vice President of Program Outreach and Risk Management Education for National Crop Insurance Services (NCIS), a not-for-profit international trade association representing companies that sell crop insurance. He has responsibility for industry wide crop insurance education, training, and public relations activities. Crane also is actively involved in risk management education and is project director for several grant-funded research and education projects.
Dr. Crane joined NCIS in 1995 as Director of Education and Training. Prior to coming to NCIS he was an Assistant Professor of Agricultural Economics at North Dakota State University and Farm Financial Planning and Management Specialist with the NDSU Extension Service.
Crane was raised on a sheep ranch in Idaho. He holds bachelor’s and master’s degrees in agriculture economics from Brigham Young University, and he received his doctorate from Texas A&M University, where his dissertation, “External Equity Financing of Production Agriculture,” received the 1992 Outstanding Doctoral Thesis Award from the Department of Agricultural Economics. Prior to joining NCIS, Crane was an assistant professor of agricultural economics and farm financial management specialist at North Dakota State University. He has written more than 100 articles on crop insurance, business planning, farm management and rural economics that have been published in scientific journals, technical reports and the popular press.
Crane is an Eagle Scout and participates in community service and church activities working with teenagers. He and his wife, Linda, have five daughters and live in Overland Park, Kansas.
Laurie Langstraat, Vice President of Public Relations
Laurie began her employment with NCIS in September of 1990. She is responsible for all communications campaigns that are produced on behalf of the private crop insurance industry. These campaigns enhance the image and credibility of the crop insurance industry. She is also the Editor and Publisher of Crop Insurance TODAY, an educational and informational quarterly publication with a circulation of 18,000. For the last seven years, Laurie has supervised a summer intern placed through the Agriculture Future of America and has served as a judge for the National FFA Placement in Agricultural Proficiency Award and the Risk Management Strategies Writing Contest sponsored by the Risk Management Agency.
Laurie grew up in a small farming community in northeast South Dakota. She graduated from the University of Minnesota-Moorhead (formerly Moorhead State University) in 1990 with a B.S. in Mass Communications/ Public Relations.