Crop insurance: Steady as she goes
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WASHINGTON, July 21, 2016 - The federal crop insurance program is financially sound and growing, but continues to look for ways to expand its offerings and reduce its already low improper payment rate, Risk Management Agency Administrator Brandon Willis said today at a meeting with reporters.
“We want this to be a well-run program,” Willis said, pointing out that the improper payment rate for fiscal 2015 was 2.2 percent, down significantly from the previous year's 5.58 percent, and almost exactly half the 4.39 percent rate for all government programs.
Those improper payments were $300 million out of the program's total outlays of $13.7 billion. By comparison, the school breakfast program's improper payment rate was 23 percent ($900 million out of $3.8 billion in outlays) and the school lunch program's rate was 15.7 percent ($1.8 billion out of $11.3 billion). The Supplemental Assistance Nutrition Program's rate was 3.7 percent ($2.6 billion out $70 billion).
Nevertheless, Willis said RMA would be using “data mining” to identify improper payments, by spot-checking the work of insurance agents and adjusters.
The goal, Willis said, is to establish improper payment rates by the end of the year for the 17 companies approved to sell crop insurance policies.
Willis said although it's “easy” to characterize improper payments as fraud, that's not necessarily the case. Payments may be unusually high or low, or be supported by inadequate documentation.
In his presentation, Willis focused on how much the program has grown over the years. “Normalized liability,” which RMA says reflects the “real” growth in the program, stands at $68.7 billion, an increase of $14.7 billion from 2009 and $23.5 billion from 2005.
Actual liability has grown from $79.5 billion in 2009 to $102.4 billion today, according to RMA figures. Insurance for corn ($40.3 billion) and soybeans ($24.3 billion) accounts for 62 percent of that liability, with wheat, at $8.4 billion, comprising 8.2 percent of the total. Cotton, almonds, rice, nursery crops, grapes, orange trees and apples round out the top 10, with all other crops accounting for $16.5 billion, or 16.5 percent of the total liability.
Acres covered by crop insurance increased from 264.7 million for 2009 to 297 million for 2015, while coverage for fruit, vegetables, and other specialty crops has increased from 7.7 million acres in 2009 to nearly 8.3 million acres in 2015.
Programs included in the 2014 farm bill also have been growing, Willis said. The Supplemental Coverage Option and the Actual Production History (APH) Yield Exclusion “have been developed to help farmers determine the level of protection needed for their operations,” RMA said in a news release.
“Both programs were implemented and expanded quickly by RMA to include many more crops than expected, including fruit, vegetables, and other specialty crops. Preliminary estimates suggest nearly 1,000 fruit, vegetable, and other specialty crop policyholders are taking advantage of APH Yield Exclusion for 2016 that allows producers to have better insurance coverage.”
Willis also highlighted insurance options that are especially attractive to organic growers, such as the Whole-Farm Revenue Protection policy, which helps diversified operations by allowing coverage for all crops on a farm. In 2015, there were 1,089 whole-farm policies with $1.1 billion in coverage.
“The number of crops eligible for organic premium pricing went from four in 2011 to 57 for the 2016 crop year,” RMA said. “The number of acres insured by organic producers grew from 576,700 in 2009 to more than 1 million in 2015.”
“We're trying to make the crop insurance program work for everybody,” Willis said.
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