Written by M. Sean High—Staff Attorney
Stabilization
and Expansion
After the 1944 amendments to the Agricultural
Adjustment Act of 1938 provided reauthorization for federal crop insurance, the
program gradually began to show improvement.
Significantly, in 1947, for the first time, premiums collected exceeded
indemnity payments on combined operations.[1]
Additionally, from 1948-1952 the total surplus of premiums collected exceeded
indemnity payments by $2.25 million.[2]
Perhaps more importantly, the federal crop insurance
program offered many farmers a valuable tool for handling uncontrollable operating
factors. Significantly, just as drought conditions
in “the 1930s provided impetus for the establishment of government-sponsored
crop insurance, so did the drought of the early 1950s demonstrate the continued
benefits of the program.”[3]
Accordingly, “[i]n 1951 and 1952, indemnities totaled $42 million and enabled
many farmers to continue operations on a scale not otherwise possible.”[4]
Throughout the 1950s, crop insurance continued to
achieve financial stability. Of note,
for every year from 1957-1961, the total surplus of premiums collected exceeded
total indemnity payments.[5]
During the 1960s, the Federal Crop Insurance
Corporation (FCIC) undertook a concerted effort to expand the program’s coverage
numbers. The effect was an increase in
total coverage from $271 million in 1959 to $920 million in 1969.[6]
Unfortunately, along with rapid program expansion, “[p]remiums did not keep
pace with liabilities and indemnities.”[7]
As a result, in 1970, the Secretary of Agriculture formed
a task force, consisting of nongovernmental insurance experts, to investigate
FCIC practices.[8]
Ultimately, the task force determined that
FCIC had incorrectly chosen to set crop insurance premiums through the use of a
countywide base. Instead, the task force
proposed that the program should set premiums “based on individual farm risks.”[9]
In 1977, the General Accounting Office (GAO)
released a report supporting the task force’s assertion that the federal crop
insurance program would be better served basing premiums on individual farm
risks. According to GAO, a crop
insurance program “based on rates individualized by farm…[would] be more
equitable because the premium rate and amount of coverage would be based on the
farm’s actual yield history.”[10] Furthermore,
GAO “suggested that individualized protection would particularly increase
participation among low-risk producers who would enjoy lower premiums and/or
higher coverage than under the existing areawide system.”[11]
In response to GAO’s recommendations, “FCIC
instituted a pilot program of individualized crop insurance in twenty counties
for the 1978 crop year.”[12] In
1979, the pilot program was expanded to offer individualized crop insurance in
forty counties.
In 1980 federal crop insurance underwent its most dramatic
expansion with the enactment of the Federal Crop Insurance Act of 1980. Designed to become the primary tool for
providing farmers with disaster protection, the legislation “removed annual
limits on expansion, previously set at 150 counties and three commodities, and authorized
the expansion of the program to all counties with significant amounts of
agriculture.”[13]
Perhaps of greatest significance, to encourage participation in the crop
insurance program, the Federal Crop Insurance Act of 1980 explicitly authorized
the subsidizing of crop insurance premiums.[14]
Farmer response to the new program was resoundingly positive. As a result, in 1981 total acreage insured
under the crop insurance program increased by 81%; up from 26.3 million acres
to 47.7 million acres.[15]
[1] Federal Crop Insurance 1938-1982,
Randall A. Kramer, Agricultural History, Vol. 57, No. 2 (Apr., 1983), p. 193
[2] Id
at p. 194
[3] Id
at p. 193
[4] Id.
[5] Id
at p. 195
[6] Id
at pp. 195-196
[7] Id
at p. 196
[8] Id
[9] Id
[10]
Id at p. 197
[11] Id
[12]
Id
[13] Id
at p. 198
[14]
Id
[15]
Id at p. 199
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