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Crop insurance concerns at hearing

Lawmaker’s concerns about the president’s proposal to cut crop insurance in his 2016 budget were raised at a House Ag Committee hearing Wednesday.

One of the issues is the rates of return being earned by crop insurance companies.  Secretary of Agriculture Tom Vilsack says they’re still too high.

“I think what we found is, this enterprise can be actuarially sound at 12%. On balance, over history, the return has been somewhere between 14-and-17%. So, it’s just a matter of the long term. This is a healthy industry and we’re seeing an expansion in the number of insurance policies and crops being insured,” Vilsack testified.

But, House Ag Committee Chairman Mike Conaway asked if it’s so lucrative, why are companies exiting the business, “If this was such a profitable business,” said Conaway, “There would be folks trying to get in it. And, what we’re being told is there are folks getting out. And, so, it seems like there’s some sort of a mindset at OMB (Office of Management & Budget) that they don’t want a public/private partnership. They want it fully public and that makes no sense to many of us.”

Conaway argues that the rates of return have been coming down since the Standard Reinsurance Agreement was renegotiated in 2011.