Congress Could Disrupt The Relative Calm In Crop Insurance

This article was originally published in the Policyholder Advisor, Volume 25, Issue 1 (January/February 2016)

Farmers and other agribusinesses holding crop insurance policies have long been relatively sheltered from coverage disputes by federal subsidies that cover as much as 70% of farmers' premiums. At present, these valuable subsidies mean that crop insurers stand to gain by keeping policyholders happy, as opposed to strategically denying large claims and risking loss of customers. Based in large part on this dynamic, crop insurance companies generally pay claims more readily than insurance companies selling other types of coverage.

Nonetheless, crop insurance policyholders should not be complacent. Congress could alter the subsidies at any time — and a change in federal subsidies could lead to a significant rise in denied claims.