The interesting and yet disturbing part of federal crop insurance is that “the companies do not compete on the basis of price but on service.” The article further elaborates on the differences:
And unlike other insurers, which try to weed out bad customers and limit risk, the federal program agrees to take on any and all comers. In fact, to attract customers, the government charges farmers only about one-third of what it actually costs to cover the claims. Since 1981, subsidies to farmers for their premiums have totaled nearly $19 billion.
Finally, under an agreement with federal officials, crop insurance companies are allowed to shift their riskiest policies to the government. In the past eight years, the companies have made a total of $3.1 billion in profit as the government has lost $1.5 billion, an analysis of records shows.
This article is a long and in depth look into the federal crop program and I recommend you read the article for the full story. Let us know what your thoughts are on this issue.
