Crop Insurance Subsidies

I know I’m a day late on this one, but here’s hoping it comes up far more than a dollar short:

Sen. John Thune and an assembly of agriculture advocates at a roundtable discussion Tuesday in Sioux Falls were in agreement that the next federal farm bill will be focused on crop insurance.

Farmers told Thune access to reasonably priced crop insurance is their safety net and is necessary to safeguard their futures.

Thune said it is the federal farm support most easy to defend when Congress and the president are looking for trillions of dollars of spending cuts.

Insurance is risk sharing–where there is generally immediate reward for future risk. That’s why we pay a premium now against the possibility of something bad happening in the future. To make things very simple, insurers make money when they guess better than the insured and are able to cover losses and have money left over from the premiums and/or investment returns on the premiums.

If crop damage is a quantifiable, insurable sort of risk–then insurers will be glad to take a part of the risk for a price. If the federal or state governments provide crop insurance, then it very quickly is not insurance (see flood insurance, FEMA).

In brief, federally provided crop insurance which is “reasonably priced” is as much a subsidy as writing checks for producing/not producing a particular crop.

While this type of subsidy may be easier to defend, that statement is true only if one refuses to understand that it is a subsidy by another name. Otherwise, why would we need money in the farm bill to support it? If it were truly crop insurance, then the premiums and investments would entirely offset the price of providing the insurance–and we wouldn’t need any additional taxpayer funding.

We can argue about whether this or that subsidy is worthwhile–but let’s not call stuff something it isn’t.

 

2 thoughts on “Crop Insurance Subsidies

  1. But people don’t really understand what insurance is. For most people, insurance is something I get so that somebody else takes care of it, whatever “it” might be. Often they think it’s free, or ought to be.

    Health insurance and home insurance are often hidden (in payroll deductions or mortgage payments) so quite a few think those are just automatically there and free. They don’t bother to read the policies or think about adding specific riders to cover what might be unusual risks and if, God forbid, those risks materialize how they will scream when they find out it’s not covered or there’s a deductible.

    My wife works in one of the hospitals as an accounts receivable clerk. The number of people who are deeply offended at having to pay for their medical care is astounding. Insurance is supposed to take care of it. When we lived in Virginia, you had to buy a special rider to cover hurricane damage. How folks screamed when they hadn’t bought it and the hurricane came through anyway. It was, naturally, the fault of the evil insurance companies who were so dad-blamed greedy.

    Car insurance is something people buy, but again, to most what they’re buying is “somebody else takes care of it”. If you doubt me, talk to a couple insurance agents and you’ll get stories about people furious over having to pay their deductible.

    Same with crop insurance. I remember talking to farmers in my first congregation and they always got upset when the insurance company didn’t pay what they said they wouldn’t pay in the contract. Somebody else was supposed to take care of it.

    1. While insurance, broadly speaking, has served a useful purpose in our society, there do seem to be far too many people who do not understand it.

      I am reminded of my wife’s grandfather who complained that he had paid car insurance for 30 years and never had an accident. “Think of all that money I spent,” he said. “Never got a thing for it.”

      Perhaps we need some town-hall-style meetings to explain all the different types of insurance–not so we can sell the it but so people can understand what it is and what it is not.

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