Thursday, March 12, 2015

USDA not charging enough for crop insurance in some high-risk areas, federal report says

The U.S. Department of Agriculture is undercharging farmers for crop insurance in some high-risk areas, says a report by the Government Accountability Office, Philip Brasher reports for Agri-Pulse, a Washington newsletter. The report said that USDA's Risk Management Agency "needs to do a better job of tracking insurance costs for lawmakers and ensure that premium rates are being increased as much they should be legally."

"From 2005 through 2013, government costs averaged 14 cents per dollar of expected crop value in higher-risk counties versus 5 cents per dollar in lower-risk ones, according to GAO," Brasher writes. "Those differences mean that for two farms, each with an expected crop value of $1 million, it cost the government on average $140,000 to insure a grower in a higher-risk county versus $50,000 in the lower-risk one."

"In 2013, the cost gap between higher risk and lower counties was 17 cents versus 5 cents per dollar of crop value, Brasher writes. The report said government costs "would have been reduced $600 million in 2013 if premium subsidies in higher-risk counties had been the same as they are in lower-risk counties: 4 cents per $1 of expected crop value. Premium subsidies in higher-risk counties that year averaged 11 cents per $1 of crop value." (Read more)

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