The federally subsidized crop insurance program is an inefficient way to support growers and a drain on taxpayers, says a critique in Choices, the journal of agricultural economics. Professor Brian Wright of the University of California says the program, which became the centerpiece of farm safety net in the 2014 farm law, “has the advantage of obfuscation; the average citizen has little notion of the wastefulness and inequity of this entitlement program.” He attributes the central role given the program to the leeway given by world trade rules to insurance as a way to mitigate losses.
During farm bill debate, farm groups supported crop insurance as a shield that was used only when growers suffered a loss. And, they argued, farmers paid a share of the premium, so they have a motivation to select coverage carefully. Wright says by its nature, multiple peril crop insurance is costly to administer, the cost to the government is significant and that without the substantial premium subsidy, farmers would not buy the policies based on studies in the United States and abroad.
Crop insurance sales are down slightly this year, with 1.2 million policies worth $109 billion sold to cover 293 million acres, according to USDA data. By comparison, growers bought 1.22 million policies with a value of $124 billion on 296 million acres. So-called revenue policies are the most popular type of coverage; declining commodity prices played a role in the liability total. Insurers paid $12 billion on losses to 2013 crops, exceeding the $11.8 billion collected in premiums, which included $7.3 billion in premium subsidies.