Crop Insurance:

Federal Program Faces Insurability and Design Problems

RCED-93-98: Published: May 24, 1993. Publicly Released: Jun 3, 1993.

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Pursuant to a congressional request, GAO reviewed the Federal Crop Insurance Corporation's (FCIC) federal crop insurance program, focusing on: (1) the extent to which the program meets insurability standards; and (2) the effect of provisions designed to foster program participation on the program's actuarial soundness.

GAO found that: (1) the federal crop insurance program has not achieved actuarial soundness because FCIC does not have sufficient information to calculate individual risks or determine the cause of losses; (2) although FCIC has attempted to increase its actuarial soundness and insurability by improving the quality of farm data and using multiyear insurance contracts, the effect of these initiatives on the program's insurability and overall cost-effectiveness is not known; (3) current legislative and crop insurance program provisions, designed to achieve 50-percent national farmer participation by providing 30-percent insurance subsidies and entitlement programs, have not significantly increased farmer participation and may impede the program's actuarial soundness; and (4) increased farmer program participation is limited by congressional disaster relief assistance and tied to various insurance and risk management options available to many farmers.

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