Program

Crop Insurance

Category

Agriculture

Subsidy Type

Insurance

Committees of Jurisdiction

Senate Agriculture Committee

$4,327 FY 16 Budget Score (in mil.)
$47,015 FY 16-25 Budget Score (in mil.)

Taxpayer-subsidized crop insurance is now the largest federal support for agriculture, costing taxpayers on average more than $8 billion annually, and as much as $14.1 billion in FY12. Though called “insurance,” it does not operate like insurance that most Americans purchase. That’s because the government typically pays 100 percent of the premiums for basic catastrophic coverage and subsidizes an average of 62 percent of farmer’s individual crop insurance premiums. In other words, for every $1 of insurance premiums, farmers contribute 40 cents while taxpayers pay 60 cents. On top of that, taxpayers subsidize the administrative costs of insurance companies, up to $1.4 billion annually, and insurance companies capture the majority of underwriting gains while shifting most risk of loss onto taxpayers. And instead of insuring against a potential crop loss, nearly 80 percent of all insured acres are covered by revenue policies that allow businesses to lock in an expected amount of revenue (crops X expected price). Thus even in a year with no crop losses, an agribusiness could receive a generous insurance payout if prices dip below expectations. Since 1995, insurance payouts have exceeded farmer contributions by a ratio of nearly two to one, meaning farmers receive $2 in payments for every $1 they contribute toward their insurance premiums. Over 80 percent of premium subsidies go to just four crops – corn, soybeans, wheat, and cotton – while fruit, vegetable, and nut producers have typically received less than 10 percent of premium subsidies.

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