Crop Insurance Today February 2012 - (Page 4)
Explaining the Costs
of the Crop Insurance Program
By Keith Collins and Frank Schnapp, NCIS
This article examines the information typically presented to the public on the costs of the Federal crop insurance program. Government presentations, the source of most program cost data, range from simple to very complex. We believe that many presentations lead to misunderstanding of the role of payments made to approved insurance providers (AIPs), the companies that deliver the program to producers. Confusion about the financial data may lead to misunderstandings of the costs and benefits of the program to producers, taxpayers and the companies. A couple of examples illustrate the issue of interpreting program financial data. While the risks of underwriting gains
and losses are shared between the government and the companies, the underwriting gains and losses of the government are seldom, if ever, presented. Often when the AIPs have a large underwriting gain, the government has one as well, which reduces the cost of the crop insurance program to the taxpayer. Another source of confusion is the vaguely labeled “administrative and operating expense reimbursement” that is paid to the companies to cover their costs to deliver the program, such as agent commissions, office space, equipment, etc. However, these payments, while a cost to the government, do not fully reimburse companies for their delivery expenses. Moreover, these payments,
which are often seen as a subsidy to the AIPs, are more properly viewed as a subsidy to producers. This article presents financial data on the crop insurance program to help clarify these ambiguities.
Federal Budget Presentations of Crop Insurance Program Costs
The Federal government presents data on the costs of Federal programs, including the crop insurance program, in a number of ways. To provide some background for those searching government data bases for crop insurance data, the following primary concepts are used in the Federal budget presentations:
Table of Contents for the Digital Edition of Crop Insurance Today February 2012
Isn't there an App for that?
Explaining the Costs of the Crop Insurance Program
NCIS Awards Two Scholarships
2012 Spring Update Conference
Commitee Sees Research First Hand
Trade Talk 2011
Retirements: Ben Latham and Steve Hams
In Memory of Patrick Flanagan
In Memory of Marx M. Mannberger
Step 5-Testing the Current Farm: Will the current farm be feasible in the future?
2011 Premiums: State Rankings
Insurable Crops: Locations & Plans
Crop Insurance Today February 2012