A report by the General Accountability Office (GAO) has found that the US Department of Agriculture could save millions of dollars by reducing the profits of private crop insurers and putting a cap on payments that cover the insurers’ administrative costs.
The report also recommends that the Department could take on more of the risk it shares with companies that have earned over $240 million annually in all but two years since 1996.
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USA Today reported that Sen. Dianne Feinstein, D-CA, requested the report. Her request came as Congress considers how much more could be saved through the upcoming 2018 Farm Bill.
Earlier this year, the Congressional Budget Office predicted that federal crop insurance would cost the federal government $7.9 billion a year between 2017 and 2026, with the GAO finding that the federal government pays the bulk of program premiums, leaving farmers to pay about 38%. The agency also noted that with the way things are, insurers can expect to earn $1.3 billion annually over the next decade.
The GAO concluded that a more reasonable target for the companies’ rate of return could reduce profits by up to $364 million a year, with no impact on farmers’ premiums or the program’s payout for losses.
GAO also found that approximately a third of the costs to the government are subsidy payments to private insurers for overheads, specifically for the 12,500 agents required to write and service policies for 1.2 million farmers. Although those subsidies have remained relatively static in recent years, the agency found the insurers had losses in only two years: 2002 and 2012.
“Crop insurance is a vital piece of our farm safety net, but this analysis by GAO suggests that changes could be made to save taxpayer dollars and improve program efficiency for our farmers,” Feinstein told Congress on Wednesday. “It deserves full consideration by members of Congress.”
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