Results of GAO's Review of the Department of Agriculture's Federal Crop Insurance Program

T-RCED-87-18: Published: Apr 29, 1987. Publicly Released: Apr 29, 1987.

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In response to a congressional request, GAO discussed the Federal Crop Insurance Corporation's (FCIC) crop loss adjustment activities, focusing on sample claims adjusted by reinsurance companies and FCIC. GAO noted that FCIC: (1) was not properly managing the loss adjustment process of reinsured companies; and (2) had inadequate oversight and control over such companies. GAO found that reinsurance companies: (1) did not adjust 95 percent of the sample claims in accordance with FCIC policies and procedures; (2) should not have paid 31 percent of the $9.4 million in claims; (3) may have intentionally overpaid claimants; and (4) made incorrect determinations of production guarantees, actual production, payment amounts, and program eligibility. GAO also found that FCIC: (1) improperly adjusted 62 percent of the sample claims; and (2) overpaid 1 percent of the claims. GAO concluded that FCIC should: (1) systematically review the content and implementation of the reinsurance companies' loss adjustment quality control programs; (2) establish better internal controls over claims payment data received from the reinsurance companies by verifying the information submitted in support of claims; (3) establish a systematic process for determining when and what administrative actions should be taken against reinsurance companies based on the results of compliance reviews; and (4) establish a systematic process for determining whether overpayments that compliance reviews identified are repaid to the federal government.

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