Sunday, April 15, 2012

Implementing Payment Limitation on Crop Insurance

I blogged about the GAO report on the impact of instituting a payment limitation on crop insurance. If adopted, FSA should send flowers to Sen. Coburn because I can't see any way for RMA/crop insurance companies to implement the limitation without FSA.

I'm not sure how it would work in practice--FSA has some experience with this sort of thing--I'm thinking of trying to apply payment eligibility and limitation rules on members of cotton and rice co-ops.  I suspect there'd be the same sort of problems with crop insurance.


Anonymous said...

As the premium is a percentage of the total liability and private insurance companies receive a percentage of the liability as subsidy, there would be no incentive to carry any dollar amount of insurance much higher than the payment limit. How much of a loss would a 10 million plus nursery in Florida be compensated for? The insurance company could kiss off the 1 million plus premium it collects today.

Bill Harshaw said...

Good point. I should read the GAO report to see how they visualized the limitation working. I suppose you could cap the liability at $1 million, or whatever, just as insurance for auto or home owners is capped. Or try this: if the maximum liability per acre is $500, cap the acreage coverage at 2000 acres, if you're going for a cap of $1 mill? So if there was a loss of production on 5,000 acres in the county, the indemnity payment would be the smaller of the two?

Then how do you handle multi-county operations.