PIA supports the vital role of independent agents in the delivery of crop insurance.
The federal crop insurance program is a highly technical program that relies on the expertise of independent insurance agents. Crop insurance offers our nation’s farmers the ability to manage their risk while continuously providing Americans with a safe, strong, and dependable food supply. The federal crop insurance program requires private-sector insurance carriers to offer insurance to growers who are eligible for coverage and interested in purchasing it.
Unlike insurers in other lines of business, crop insurers do not set premiums. Instead, farmers’ rates are calculated by the United States Department of Agriculture (USDA), and, unlike prices for other insurance products, crop insurance prices are consistent across insurers.
The agriculture sector was confronting a difficult economic reality even before the pandemic, and the pandemic caused unprecedented additional uncertainty across economic sectors. This protracted period of volatility has taken its toll on farmers throughout the country. Farm debt has increased steadily over the last decade and was expected to reach $496 billion in 2022.
Opposing crop insurance cuts
Despite the critical role crop insurance plays in protecting farmers from natural and economic disasters and in supporting rural economies, presidents of both parties have historically tried to cut crop insurance funding using the budget and appropriations process.
PIA routinely works with a coalition of organizations that represent every part of the crop supply chain to protect the funding of the federal crop insurance program. This advocacy is required due to past attempts to cut the program. In 2015, Congress cut $3 billion cut to the program, but PIA and its allies successfully pushed for a statutory reversal to the cuts. In addition, billions of dollars in cuts to crop insurance have been included in presidential budget requests for most of the last decade. Indeed, past budget requests from as recently as Fiscal Year (FY) 2021 included an eight percent cut to the USDA, and crop insurance specifically would have been cut by $25 billion over the forthcoming decade.
In 2021, however, our advocacy paid off, when, in a victory for PIA and our allies, the FY22 budget released by the White House sought $27.8 billion for the USDA—representing a 16 percent increase—and, importantly for PIA’s crop insurance agents, included no cuts to the crop insurance program.
In 2022, for the second year in a row, and notably for PIA crop insurance agents, the FY23 budget again avoided proposed cuts to the federal crop insurance program in the president’s budget request. These successes are a testament to the advocacy of PIA and our allies.
Cuts to the program compromise the affordability and availability of crop insurance for farmers, seriously undermining the strength of the farm safety net. But our current national condition of unprecedented inflation makes such cuts particularly burdensome for farmers and rural America. Now may be the worst possible time to reduce funding for the federal crop insurance program, on which so many farmers and ranchers rely to stay afloat. PIA will continue to work against any attempts to cut crop insurance throughout 2023.
Seeking inflation adjustments
Last fall, PIA successfully advocated for the inclusion of crop provisions in the year-end federal government appropriations package, known as an omnibus. The provisions included in the 2022 year-end omnibus acknowledge the need for the federal government to alleviate economic challenges that have faced crop insurance agents for years. First, the 2011 Standard Reinsurance Agreement (SRA), which is the contract between the Federal Crop Insurance Corporation and crop insurers, established a broadly applicable cap on the administrative and operating (A&O) expense subsidy. To make matters worse, beginning in 2016, the U.S. Department of Agriculture’s Risk Management Agency (RMA) stopped making annual inflation adjustments to the total A&O subsidy cap, leaving its value fixed in 2015 dollars, where it remains today.
These actions resulted in effective cuts to agent commissions, during a historically challenging time for crop insurance agents.
The provisions included in the 2022 omnibus begin to address this problem confirming in the accompanying report that the USD A has the legal authority to reinstate the inflation adjustment without renegotiating the SRA. The inclusion of this language makes clear Congress’s view that the RMA could reinstate the A&O inflation adjustment for all crop agents.
With the Farm Bill up for reauthorization at the end of 2023, PIA will continue its work ensuring policymakers understand the critical role PIA’s independent agent members play in providing insurance for crops and, in so doing, helping to guarantee the availability of a safe, strong, and dependable food supply.
For the most up-to-date information on crop insurance and the rest of our advocacy issues, be sure to visit and follow the PIA Advocacy blog, located at www.piaadvocacy.com.