Crop Revenue Insurance: Problems With New Plans Need to Be Addressed
RCED-98-111
Published: Apr 29, 1998. Publicly Released: Apr 29, 1998.
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Highlights
Pursuant to a congressional request, GAO reviewed various issues pertaining to the Department of Agriculture's new crop revenue insurance plans.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture | To be more certain that the revenue insurance plans are actuarially sound over the long term and are appropriate to the risk each farmer presents, the Secretary of Agriculture should direct the Administrator, Risk Management Agency, to address the shortcomings in the methods used to set premiums. Specifically, with respect to all three plans, the Secretary should direct the Risk Management Agency to reevaluate the methods and data used to set premium rates to ensure that each is based on the most actuarially sound foundation. With respect to Crop Revenue Coverage, the Risk Management Agency should base premium rates on a revenue distribution or another appropriate statistical technique that recognizes the interrelationship between farm-level yields and expected prices. |
Closed – Implemented
GAO recommended that the Risk Management Agency (RMA) reevaluate the methods and data used to set revenue insurance premium rates to ensure that each is based on the most actuarially sound foundation. RMA responded that it reviews premium rate-setting methods for all crop insurance products on an ongoing basis, and makes adjustments to the methods as knowledge is obtained from experience and research. As part of this process, RMA intends to reevaluate the methods and data used to set premium rates for revenue insurance plans.
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Topics
Agricultural productionAgricultural programsFarm income stabilization programsGrain and grain productsInsurance claimsInsurance cost controlInsurance premiumsCrop insuranceInsurance ratesRisk management