The federal government provided millions of dollars in subsidies to large farmers to pay for much of the cost of their crop insurance policies last year, according to a Government Accountability Office report released on Monday.
The federal crop insurance program is intended to encourage farmers to protect their crops against natural disasters, extreme weather and other destructive events by purchasing private insurance that is heavily subsidized with taxpayer dollars.
Under the program, farmers can buy insurance policies to help cover financial losses from crop price declines and poor yields resulting from natural disasters. Private companies sell the policies, but the federal government covers much of the cost — paying on average about 62 percent of the premiums and subsidizing the insurers’ administrative expenses.
The cost of the federal crop insurance program ballooned last year, reaching $17.3 billion in 2022, according to Agriculture Department data. Roughly $3.7 billion of that amount was paid to insurance companies and agents that sell and service the policies. In 2021, the program cost the federal government roughly $9.4 billion, according to Agriculture Department data.
Unlike other farm programs that have income or payment limits, the crop insurance program does not have similar restrictions, so wealthy farmers can get millions in federal subsidies to cover the cost of their insurance, regardless of their income.
Although the federal subsidies are meant to encourage more farmers to buy crop insurance, many smaller farmers still cannot afford to participate, said Scott Faber, the senior vice president of government affairs at the Environmental Working Group, a nonprofit advocacy organization. He added that the new report contained “staggeringly big numbers” that shed light on the program’s biggest beneficiaries.
Changes to the crop insurance program, however, could face opposition from agricultural associations. The American Farm Bureau Federation, which represents farmers across the country, has said it wants to see a “robust” crop insurance program with “no reductions in premium cost share.”
Anne Schechinger, the Midwest director at the Environmental Working Group, said the report’s findings underscored that taxpayers were “sending billions of dollars every year to very wealthy companies.
According to the report, federal subsidies for companies’ administrative and operating expenses have steadily increased over the years. From 2011 through 2017, those costs averaged $1.4 billion a year, climbing to $1.7 billion a year from 2018 through 2022. In 2022, the federal government paid companies $2.2 billion for administrative expenses.
In two cases, insurance companies received more than $3 million for selling and servicing a single policy. That included a dairy protection policy and another policy that covered losses of forage or hay for feeding livestock.
“This part about the money going to agents and companies is especially important because that’s billions of dollars every year not going to farmers,” Ms. Schechinger said.
