"Prevented Planting" Insurance Plows up Wetlands, Wastes $Billions
Prevented planting coverage for excessive moisture is simply unworkable in the Prairie Pothole Region, particularly in those counties where seasonal wetlands dominate the landscape. "Excessive moisture" is the normal and expected condition in this unique and important landscape.
Encouraging growers to plow through and plant seasonal wetlands is a disaster for taxpayers and the environment. The prevented planting payouts generated year after year in a handful of counties function more as another form of farm income support than as a sound insurance program. Billions of dollars have been wasted paying claims on acreage that shouldn’t be eligible for insurance in the first place, while threatening one of the most important remaining wetland landscapes in North America.
To its credit, USDA’s Risk Management Agency has tried since 2006 to clamp down on the excesses in the Prairie Pothole Region, but those efforts have failed to stem the tide of payouts and wetland degradation. EWG’s analysis of weather data suggests that the agency’s latest policy revision is also likely to fail.
Not surprisingly, the prevented planting option is popular among growers and their Congressional allies. It is unclear, however, why taxpayers should be expected to subsidize coverage for excessive moisture or why other growers should bear the burden of premium increases because of the unwarranted and very large prevented planting payouts that go out year after year.
Rather than trying yet again to tighten its loss adjustment standards to manage an unworkable program, the agency should engage the private sector to develop insurance products – unsubsidized by taxpayers – for growers who want and are willing to pay an actuarially sound premium. The weather-based insurance developed by the Climate Corporation, for example, would be a good model to follow.
If the government continues to subsidize excessive moisture coverage in the region, the Risk Management Agency will have to dramatically strengthen its loss adjustment standards and its capacity to enforce those standards to avoid the worst abuses.
Denying coverage on acres that have repeatedly generated payouts would be the most straightforward and easily enforceable step. Such a standard would be grounded in the basic principles of insurance and be in keeping with at least some official interpretations of the statute that authorizes prevented planting coverage.
Alternatively, EWG’s analysis of weather data suggests that a stand-alone standard that limits coverage to those acres that have been successfully planted two years in a row would better protect both taxpayers and wetlands.
Congress made it impossible for EWG to evaluate the likely impact of such a standard by hiding information about individual federal crop insurance policies and policyholders behind a veil of secrecy. The Risk Management Agency and/or its inspector general could and should take on that task and make its findings available to Congress and taxpayers as a first step toward more effective oversight of this coverage in the Prairie Pothole Region.
Following the recommendations of its inspector general, the agency abandoned any references to "normal" weather in its loss adjustment standards. The inspector general made its recommendation because RMA had not provided loss adjusters with a clear definition of normal weather and a methodology for determining whether weather was normal during the planting period.
Determining if acreage is physically available for planting when precipitation is above or below normal remains the crux of the problem. Weather data are increasingly robust and USDA has already made a substantial investment in developing a climate and weather system that assembles real-time data on precipitation for use in managing its crop insurance program. The National Climate Data Center uses 30-year precipitation records to publish estimates of what amount of precipitation is "normal" for a region. the Risk Management Agency could use these data to provide a consistent definition of normal precipitation and a methodology for making that determination as a way to bolster loss adjustment standards and as a compliance tool to strengthen oversight of the program.
Finally, a long string of external evaluations has made it clear that the Risk Management Agency needs, at a minimum, to increase its capacity to utilize weather data, state-of-the-art remote sensing and additional data management tools. It also needs to increase the size of its on-the-ground compliance staff in order to oversee the work of crop insurance companies and adjusters to improve implementation of this troubled program.
On balance, the best option for taxpayers and the environment would be to end federally subsidized prevented planting coverage for excessive moisture in the Prairie Pothole Region and look to the private sector for innovative and affordable solutions for farmers attempting to grow crops in this unique and important landscape.