Support Common Sense Reforms to Federally Subsidized Crop Insurance

Letter to the HillSupport Common Sense Reforms to Federally Subsidized Crop Insurance

Agriculture  | Quick Take
Sep 19, 2017  | 3 min read | Print Article

Dear Senator,

The undersigned organizations urge you to support efforts by Senators Flake (R-AZ) and Shaheen (D-NH) to protect taxpayers by reducing insurance company subsidies in the federal crop insurance program. S. 1773 introduced on September 7th makes two important improvements to the federally subsidized crop insurance program:

1) The bill amends the Federal Crop Insurance Act to lower the Standard Reinsurance Agreement (SRA) rate of return from 14.5 percent to 9.6 percent.

2) It also removes the 2014 Farm Bill imposed provision prohibiting the USDA’s Risk Management Agency (RMA) from realizing significant taxpayer savings through regular renegotiations of the SRA.

The Standard Reinsurance Agreement is an annual contract between the federal government and crop insurance companies detailing the subsidies companies receive for selling and processing policies and divides any potential profits from policies that don’t make a claim. From 1992-2015 crop insurance companies experienced 21 years of positive underwriting gains, while taxpayers suffered losses in 13 of those 24 years.

These more than $15 billion in company underwriting gains are in addition to the $1.4 billion per year companies receive in subsidies for selling policies and processing claims. The bill simply creates a target rate of return more in line with what the Government Accountability Office found are the actual market conditions in crop insurance.

Removing the restriction on RMA’s ability to renegotiate an improved SRA is also critical to creating a more cost-effective federal crop insurance program. The last SRA renegotiation in 2010 produced more than $6 billion in taxpayer savings while having no impact on the availability of crop insurance or the premiums charged to agricultural producers who purchase crop insurance.

Upset their easy money subsidies had been slightly reduced, the crop insurance lobby and the agriculture committees inserted a provision in the 2014 farm bill to prohibit any future administration from generating savings by renegotiating a better deal for taxpayers. This blatant case of crony capitalism must not be left in place.

We urge you to support S. 1773 as a common sense step to rein in unnecessary spending in the federal crop insurance program and help reduce our $20 trillion national debt. We commend Sens. Flake and Shaheen for their leadership on this issue and urge you to cosponsor the legislation.

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Sincerely,
Campaign for Liberty
National Taxpayers Union
R Street Institute
Taxpayers for Common Sense
Taxpayers Protection Alliance