Written by M. Sean High—Staff Attorney
Growing
Pains
With the passage of the Federal Crop Insurance Act
of 1938, federal crop insurance was initially only available for wheat planted in
1939. To administer the crop insurance
program, the enacted legislation created the Federal Crop Insurance Corporation
(FCIC), an agency within the United States Department of Agriculture. Accordingly, FCIC was to be managed by “a
board of directors appointed by the Secretary of Agriculture.”[1]
The first version of federal crop insurance was “authorized
for wheat planted for harvest in 1939” and provided coverage for losses resulting
from “drought, flood, hail, wind, winterkill, lightning, tornado, insect infestation,
plant disease, and such other unavoidable causes as may be determined by the
Board.”[2] This
initial version of federal crop insurance, however, did not prove to be successful.
In the first year of its offering, the crop
insurance program made indemnity payments to nearly one-third of all the
165,775 enrolled farmers.[3] Significantly, overall national participation
in the program was relatively low which led to these indemnity payments greatly
exceeding the total premiums received.[4] While
participation in the program would gradually increase in 1940 to 360,596 farms
and in 1941 to 371,392 farms, these relatively low enrollment numbers resulted
in the program losing money each year as indemnity payments made to farmers continued
to exceed the total amount of premiums collected.[5]
In 1941, the federal crop insurance program was
expanded to include coverage for cotton.
Subsequently, in 1942 and 1943, crop insurance results for cotton and
wheat mirrored those for wheat alone as “[i]ndemnities greatly exceeded
premiums during both years.”[6] As
a result of these poor performances, in 1943, Congress passed legislation that
“prohibited the FCIC from writing any new crop insurance policies after 31 July
1943.”[7] Nevertheless,
the suspension of the crop insurance program would prove to be temporary.
In late 1944, in an attempted to correct the
problems with the original version of crop insurance, Congress passed
legislation that amended the Agricultural Adjustment Act of 1938. The
result of the amendment was not only a restoration of crop insurance, but an
expansion the program.
Under the 1944 amendment, FCIC was authorization to provide
crop insurance coverage for not only wheat and cotton, but also for flax crops. Additionally, policies could now be written
to “include losses resulting from frost, fire, excessive rain, snow, wildlife,
and hurricane.”[8]
Importantly, coverage was restricted to certain designated counties and FCIC
was given the power “to refuse to sell insurance in high-risk areas.”[9]
Significant to achieving the goal of expanded
program participation, the new legislation authorized FCIC to begin
implementing “experimental crop insurance programs for ‘corn, dry beans, oats,
barley, rye, tobacco, rice, peanuts, soybeans, sugar beets, sugar-cane, timber
and forests, potatoes and other vegetables, citrus and other fruits, tame hay,
and any other agricultural commodity, if sufficient actuarial data are
available.’”[10]
Immediately, FCIC began offering crop insurance “on a trial basis in 1945 for
corn in fifteen counties and tobacco in twelve.”[11]
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