Private companies are integral to crop insurance’s future because they shoulder risk that would otherwise be borne by taxpayers and because they maintain the system used to efficiently provide assistance to farm families following disasters.
However if the business does not remain viable, private-sector participation could wane, which would weaken America’s farm policy, according to a new video released today by National Crop Insurance Services (NCIS).
“Key to this viability is a reasonable rate of return for insurers on the infrastructure they built to deliver farmers’ most important risk management tool,” the video explained. “An adequate return on investment enables insurance providers to routinely reinvest in technology, infrastructure efficiency, and service improvements for farmers and ranchers. Unfortunately, adequate returns don’t always happen.”
Among the factors that have made crop insurance less viable in recent years:
· Weather disasters and crop price volatility since 2011 have resulted in record loss payments from crop insurance providers;
· $1.2 billion a year in federal funding was cut in 2008 and 2011; and
· Farm policy opponents are targeting crop insurance for further funding reductions.
The 2014 Farm Bill took steps towards improving crop insurance by expanding coverage, by bringing new customers into the system, and by providing new tools to continually minimize waste, fraud, and abuse.
Tom Zacharias, president of NCIS, applauded Congress’ actions and said it will be important to continue making improvements by reducing regulatory burdens, avoiding further funding cuts, and keeping crop insurance actuarially sound. And he believes that all Americans have a stake in the future of crop insurance.
“After all, not everyone farms, but everyone eats. So everyone depends on a strong farm policy,” the video concluded.
The NCIS video, which can be viewed here, is the last in a three-part series dedicated to the key policy attributes essential to crop insurance’s continued success. Previous pieces examined the importance of making crop insurance widely available and affordable to farmers.