Crop Insurance:

Federal Program Has Been Unable to Meet Objectives of 1980 Act

T-RCED-93-12, Mar 3, 1993

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GAO discussed whether the federal crop insurance program has met its intended objectives. GAO noted that: (1) although the Federal Crop Insurance Corporation (FCIC) has increased the number of county crop programs to farmers by over 250 percent since 1981, premiums remained actuarially unsound and net premium losses totalled $2.3 billion; (2) FCIC utilized and reinsured private insurance companies to deliver most of the crop insurance policies that placed FCIC in a high risk position; (3) since 1981, reinsured companies have realized a $101 million underwriting profit, while FCIC has sustained $2.3 billion in underwriting losses; (4) FCIC lacks sufficient controls over how private insurance companies serviced crop insurance claims adjustments; (5) 31 percent of the 134 claims filed from 1984 to 1985 resulted in overpayments; (6) even though FCIC has improved its oversight of claims adjustments, claim overpayments continue to be a material weakness in the program; and (7) of the $25 billion expended on crop insurance, emergency loans, and direct overpayments, the Department of Agriculture spent $6 billion on crop insurance and $19 billion on other types of assistance.