The Hagstrom Report

Agriculture News As It Happens


Crop insurers will fight proposal for FSA office takeover


SCOTTSDALE, Ariz. — The American Association of Crop Insurers and other industry groups will oppose all attempts to turn over portions of the crop insurance program to the Agriculture Department's Farm Service Agency county offices, crop insurance leaders said here today.

AACI members have been working for two years to explain how the crop insurance program has evolved, said David Graves, the executive director of AACI, speaking on the sidelines of the Crop Insurance and Reinsurance Bureau meeting.

“Crop insurance companies have invested hundreds of millions of dollars in providing services to farmers,” Graves said. Farmers’ statements about the importance of crop insurance “reflect delivery as much as the program. Farmers complain about program provisions, not service.”

He noted, however, that there are many newer members of Congress who do know the 30-year history of the program and said his group is making sure newer members learn about it.

Graves was reacting to a study released Wednesday by the National Association of FSA County Office Employees contending that the government could save up to $2.5 billion per year by taking the crop insurance program away from insurance companies and agents and turning it over to the county offices.

If nothing else, Congress should at least save some money by turning over reporting work to the county offices, officers of the association, known as NASCOE, told The Hagstrom Report in an interview Thursday.

About 200 county office workers from 45 states are visiting Capitol Hill offices this week presenting copies of the Informa Economics study to members of Congress and their staffs. NASCOE officials have acknowledged that as traditional farm subsidies have declined and crop insurance has become more important, they are searching for what role they will continue to play.

Graves also pointed to a paper that AACI developed in May 2011 on its positions on the 2012 farm bill.

“Private sector delivery is a major factor in the success of the modern crop insurance program,” the AACI paper says. “Private companies and agencies have the built-in incentive and ingenuity to provide the service farmers, ranchers and growers need and depend on in making risk management decisions in using the federal crop insurance program.”

The group also said that, when farmers had a choice of buying a policy from the government or an agent, studies showed that the private sector was more efficient than the government in delivering the program. Those who call for greater FSA involvement in the program “as a way of saving federal jobs in the countryside do not have the interests of farmers at heart,” AACI said.

Michael Torrey, executive vice president of the Crop Insurance and Reinsurance Bureau, said in an interview that while he appreciated the effort to preserve jobs, private companies and agents “have brought ingenuity that serves the customers well. In the end of the day it is about the customer.”

Robert Parkerson, former president of National Crop Insurance Services, an industry research group, said in an interview that crop insurance agents “are hard-working people who have gone out and explained to farmers the benefits of crop insurance.”

Parkerson added that he cannot see the government attracting the qualified staffs that are needed to write and sell the policies and work as adjusters when farmers have losses.

American Farm Bureau Federation lobbyist Mary Kay Thatcher, who spoke at the convention, said in interview that the crop insurance program is too important to risk changing the delivery.

“It is complex, and the agents have been at it for years,” she said. “That is where it ought to stay.”

But in her speech, Thatcher also warned that once direct payments are eliminated from the farm program, there will be pressure to cut spending on crop insurance because it has become the most expensive part of the farm program.

“You’re not the low-hanging fruit now, but you will be when this farm bill is over,” Thatcher told the insurers.

The Congressional Budget Office has estimated that the crop insurance program will cost the government between $8 billion and $9 billion per year over the next 10 years, for a total of $90 billion.

Crop insurance is written by private companies and sold by crop insurance agents. Farmers pay premiums for the insurance, but the government pays about 65 percent of the cost of the program by subsidizing premiums, paying for the cost of administering and operating the program and assuring the companies that they will have underwriting gains.