Why is private-sector delivery of crop insurance important?

Private-sector delivery is a key strength of crop insurance because time is of the essence when a major loss occurs and farmers need money to meet financial obligations.

Government ad hoc disaster programs are notoriously slow in getting Congressional approval and then gearing up to deliver payments to farmers, often taking as long as 18 months to two years after a disaster for help to finally arrive. Crop insurance, on the other hand, is a highly dynamic program that is closely tailored to each farmer’s operation and generally delivers assistance within 30 days of a claim being finalized.

While the Federal government originally delivered crop insurance, in 1981 lawmakers turned to the private sector to help deliver crop insurance amid low program participation and high taxpayer cost for ongoing ad hoc disaster programs. The new public-private partnership formed between the U.S. government and private insurance companies brought together the efficiencies of a private-sector delivery system with the regulatory and financial support of the Federal government.

Today, the private-sector crop insurance companies employ more than 20,000 licensed agents, certified loss adjusters and company staff who sell policies to farmers, adjust and determine the extent of losses, collect premiums, and pay claims. Furthermore, companies invest heavily in technology, infrastructure efficiency, training programs, and service improvements for farmers and ranchers.

Watch a video on private sector efficiency here. Watch a video that discusses why affordability, availability, and viability of Federal crop insurance are so crucial.

* Updated January 2023