Iowa Insurance

During 2002, a small insurance company Emporkömmling the federal government an idea. The company, the harvest-1, was one of 16 companies subsidized federal sells insurance policies to farmers to harvest Thursday by the government.

Crop 1 plan was modest. He wanted a slight amount of competition by farmers, offering discounts of up to 10 percent on their premiums.

An outbreak followed. The other companies to resume rapidly the Congress concludes the idea. The Congress of letters of testimony and legislators and regulators, she complains that the price of competition threatens the “unique public-private partnership” that the company had with the government.

With the help of several powerful members of Congress, the program was finally derailed.

“Why do you want to kill a program that farmers save money unless you do not love to compete? Asked Steve Baccus, president of the company, now owns Crop 1 “This is to maintain the status quo.”

The episode highlights the power of a collection of niche insurance companies, the benefits of several billion in the federal budget programs crop insurance program and the government has lost billions for the most risky calls for a “Washington Post” investigation has found.

Last year, the company has $ 927 million in the profit, a record. They awarded another $ 829 million by the Government of management fees to help run the program. In addition, the taxpayer has produced $ 2.3 billion to subsidize premium payments for farmers.

All this helps farmers $ 752 million for losses caused by adverse weather conditions.

“We’d probably better off than the farmers the money directly,” said Bruce A. Babcock, an agricultural economist at Iowa State University, recently published its own study on the program. “In this way we would save on all costs to private insurers.

Insurance companies say they can not afford to provide farmers coverage without government subsidies because of the dangerous nature of agriculture. As for their profits, they say they are in danger more than ever, and owe money to protect against a potentially catastrophic loss.

“They have a good year for evil,” said Scheef Saturday, President of ARMtech Insurance Services, the Confederation has sold insurance policies harvest in 40 countries. He added that other firms is not “exactly like a business.”

Federal crop insurance, one of the greatest works of the Nation’s Farm extensive and costly system of subsidies, not resemble any other insurance. Unlike businesses, to sell the car owner or insurance companies are not competing on the basis of price, but on services.

And unlike other insurers, who try not desired clients are poor and may limit, the Federal Republic of agreement of any relief programme. Indeed, customer acquisition, the government charges farmers about one third of what it does to cover the cost of claims. Since 1981, subsidies to farmers for their premiums, a total of nearly $ 19 billion.

Finally, under an agreement with the Confederation of officials, insurance companies are allowed to harvest the relocation of their risky government policy. In the past eight years, companies have a total of 3.1 billion dollars of profits, whose government lost 1.5 billion dollars, an analysis of records shows.

“Harvest programs insurance reform is a good idea gone awry,” said Jerry R. Skees, an agricultural economist at the University of Kentucky. “It is costly, complex and inefficient.