Setting the Record Straight on Crop Insurance
By Thomas P. Zacharias
Admittedly, opponents of farm policy attract more headlines than the men and women who put food on our tables and clothes on our backs.
Then again, it is far easier to get attention with sensationalist claims and unsubstantiated data.
Take the drought of 2012 for example. Opponents of crop insurance made news by claiming that taxpayers would be responsible for as much as $40 billion. Critics called crop insurance a farmer bailout and said things like farmers were “laughing all the way to the bank” and were “praying for drought, not praying for rain.”
Never were these anti-agriculture activists and for-hire university economists criticized for their bombastic tone or baseless predictions that turned out to be incredibly inaccurate.
Sure, farmers tried to set the record straight, but supporting a farm policy that helped protect taxpayer dollars is not as glamorous as inflated estimates and inflammatory rhetoric.
Now, crop insurance opponents are at it again as Congress prepares to negotiate a farm bill. Farmers have been accused of “taking bribes.” Farmers even have been compared to cheap drunks at an open bar and told to pay their fair share.
Use of such language and misleading information is simply unprofessional and must be challenged.
Here are the undisputed facts of what transpired after the worst drought our country has seen in decades.
Indemnities to farmers cost about $17 billion. Thanks to crop insurance’s design, these indemnities were not completely borne by taxpayers because farmers and insurers picked up a major portion of the costs and sustained significant economic losses.
Farmers had insurance deductibles so they shouldered at least $12.7 billion in losses before they collected a single check from their insurance companies. Not exactly “laughing all the way to the bank.”
When combined with the $4.1 billion farmers paid out of their own pockets to purchase crop insurance last year, total farmer investment neared $17 billion. To any reasonable person, that constitutes “paying their fair share.”
Although the final tally is not in, crop insurance companies will shoulder about $1.5 billion in losses — a cost that otherwise would have fallen to taxpayers.
This is the sixth time since 1983 that crop insurers lost money. Compare that to the property and casualty insurance industry, which has lost money only once as far back as data is available.
It is also important to note that when crop insurance premiums exceed losses, the government sees underwriting gains that help offset payments in bad years. In fact, the government experienced nearly $4 billion in gains from 2001 to 2010.
Perhaps most important of all, Congress was not asked to fund an ad hoc disaster bill despite the historic devastation endured by our agricultural producers.
That is in stark contrast to the days before the current crop insurance system. In fact, 42 ad hoc disaster bills totaling $70 billion have been passed since 1989, according to the Congressional Research Service.
Reasonable minds can differ on farm policies, and the farming community has always welcomed a reasonable debate on the issues.
However, the farming community should not be subjected to a litany of ill-conceived metaphors and tasteless punch lines wrapped in the veil of academia and protected by an outdated system of university tenure.
Instead of reprehensible quips about “open bars,” we have a responsibility to raise the bar and have a reasoned dialogue. Lawmakers and the American public deserve an intelligent conversation about the future of agriculture that is kept to just the facts.
Thomas P. Zacharias, Ph.D., is president of National Crop Insurance Services and formerly was an associate professor at Iowa State University.