Crop Insurance

An Annual Disaster

Thursday, November 5, 2015

By Anne Weir, Senior Analyst, Economics and Craig Cox, Senior Vice President for Agriculture and Natural Resources

Crop Insurance

An Annual Disaster

The federal crop insurance program has come under attack for its increasing cost, environmental impacts and secrecy. But the farm lobby, the crop insurance industry and their political patrons maintain that despite its flaws, crop insurance is better, cheaper and less likely to lead to environmental harm than disaster programs.

The facts tell a very different story. Crop insurance actually costs billions of dollars more than disaster payments.

  • From 1999 to 2008, in the six years Congress authorized large ad hoc disaster relief programs, farmers got about $15 billion in disaster payments, but more than $26 billion in crop insurance payouts.
  • Crop insurance payouts went out year after year. Crop insurance payouts exceeded disaster payments in all of these years except 2005.
  • After subtracting farmers’ share of the premiums and adding administrative costs, the net cost to taxpayers of crop insurance was almost $20 billion.

Crop insurance cost far more than ad hoc disaster payments. 

Source: EWG, from 2012 Farm Subsidy Database
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Payouts to farmers from the crop insurance program have been far more generous than disaster payments because crop insurance policy deductibles are much smaller, the price at which losses are paid out is much higher and crop insurance guarantees crop prices in addition to crop yield. Adding salt to the wound, crop insurance actually exacerbates rather than reduces the incentives to plant on high-risk and environmentally sensitive land.

Crop insurance is not really insurance, but income support masquerading as disaster relief. Policymakers must cut through the myths spread by its champions and return crop insurance to a safety net taxpayers and the environment can afford.

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