Wednesday, February 25, 2015

How Many Insurance Companies Do We Need

From Farm Policy a quote from Vilsack testifying before Congress:
"“And I’m pleased with the fact that we’ve had a net increase in the number of companies writing crop insurance in the last 12 to 24 months. We’ve lost a couple, but we’ve gained four, so that the net is two, so I think it’s an indication that this is still an industry that can continue to expand [appropriately] and financially. We expect and anticipate roughly $8 billion plus to be invested by taxpayers in this system over the course of the next several years. And the payouts in the last time since I’ve been Secretary equal $55 billion, so it’s obviously an important program.”
 The administration thinks crop insurance costs can be cut; the crop insurance industry says not. What's the right answer?    Seems to me simple economics, the only kind I halfway understand, says that if an industry is profitable, and costs of entry are reasonable, you'll have more firms entering.  Conversely, if the industry is under stress, the weaker firms will fail or withdraw from the market.  So since the number of companies is increasing, that says to me the administration's position is more nearly right.  Maybe we ought to have a target for the number of companies: maybe five or six (in the good old days we had about six car companies and six computer (mainframe) companies, so six sounds like a good round figure. 

How about it?  :-)

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