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Tuesday, February 08, 2011

Farmers, agents and adjusters caught cheating on federal crop insurance

P.J. Hufstutter of the Los Angeles Times reports on a wave of insurance scams by "farmers who fraudulently claim that weather or insects destroyed their crops to cash in on a government-backed insurance program. Others sell their harvests in secret and then file claims for losses, collecting twice for the same crop."

The farmers, assisted by insurance agents and claims adjusters, "are using the program to bilk insurance firms and the U.S. government out of millions of dollars a year, according to prosecutors, industry officials and high-tech experts who review questionable claims for the U.S. Department of Agriculture," writes Hufstutter. To help farmers recover from the Depression, the federal government created Federal Crop Insurance Corp., which by decades later, the government was subsidizing farmer premiums to encourage participation.

In 2009, taxpayers paid nearly $4 billion to the 16 insurers involved in the federal insurance program, according to the USDA's Risk Management Agency, which administers the program. Of that, $1.5 billion was paid in commissions to an estimated 15,000 insurance agents. USDA said it retained $1.4 billion, some of which came from farmers' premiums. Meanwhile, taxpayers paid $1.7 billion to subsidize farmers' premiums. The insurance industry disputes the figures. Federal budget problems have called into question farm subsidies and it's likely this program will be scrutinized as well. (Read more)

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