Crop Insurance:

Participation in and Costs Associated With the Federal Program

RCED-88-171BR: Published: Jul 6, 1988. Publicly Released: Jul 6, 1988.

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In response to congressional requests, GAO reviewed the Federal Crop Insurance Corporation's (FCIC) crop insurance programs to determine: (1) the level of farmer participation in the programs; (2) why participation rates varied; and (3) insurance experts' reasons for the low participation rates and suggestions to increase the rates.

GAO reviewed crop insurance programs in 10 states, and found that: (1) participation rates among the states varied from 2.9 percent to 44.9 percent; (2) some crops had 60-percent participation, while others were not insured at all; (3) fluctuations in weather patterns, program promotion and education efforts influenced participation rates among both states and crops; (4) crop insurance experts cited crop diversification, the condition of the farm economy, and insurance agent problems as reasons for low participation rates; (5) crop insurance premiums and cash flow also varied considerably among states and crops; and (6) there were no comprehensive, nationwide studies to determine the reasons for low program participation.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: FCIC has increased its educational/training activities on financial management, in response to recommendations made by the Federal Crop Insurance Commission. FCIC is working with USDA/ERS on a nationwide study that will give some incite into crop insurance participation, but the scope is limited. FCIC does not have the funds to conduct a study as GAO recommended.

    Recommendation: The Secretary of Agriculture should require the Manager, FCIC, to: (1) increase the emphasis on educating farmers and insurance agents about crop insurance on a regional or state basis with priority given to areas that FCIC has already identified as likely to increase participation with more education; and (2) conduct a statistically sound, nationwide study to determine which of the major factors influencing participation could or should be addressed, and obtain information on the kinds of changes needed to achieve more participation and the costs of such changes to the government and farmers.

    Agency Affected: Department of Agriculture

 

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