Study says taxpayers overpaid nearly $7 billion for crop insurance in 2012; could go up

Taxpayers paid $12.7 billion in crop insurance to compensate corn and soybean farmers for economic losses in 2012, when the actual loss was $6 billion, reports Sara Sciammacco for the Environmental Working Group, which commissioned a study on the subject. The amount taxpayers pay could go even higher if the proposed Farm Bill passes. (Photo: Aboutfacts.net)

The study author, Iowa State University agricultural economist Bruce Babcock, found that through "lavish taxpayer subsidies, farmers have extraordinary incentives to over-insure their crops and dramatically drive up the cost of crop insurance when disaster strikes," Sciammacco writes. 

"Farmers covered by the so-called Revenue Protection policy -- the most highly subsidized policy in the areas hardest hit by the drought – likely netted more revenue than they would have if the drought hadn’t occurred," she writes. "Since 2001, insurance companies have enjoyed $10.3 billion in underwriting gains – while taxpayers have suffered a net loss of $276 million." (Read more)