Access to a fair, reliable crop insurance program is necessary to crop producers across the country, and I applaud the Chairman’s decision to hold this hearing, to get to the bottom of concerns laid out in the reports prepared by the Office of the Inspector General at USDA and the General Accounting Office.  Fundamentally, there are four groups who play a role in the federal crop insurance system: 1) the farmers, 2) the crop insurance companies, 3) the independent agents who market a large share of the insurance products, especially in the Midwest, and 4) last and not least, the Federal government, behind whom lie the taxpayers.   For widespread acceptability of the program, all of their interests must be considered.

The issues addressed in the OIG report are important, although I am concerned about its one-sided nature.  It is my understanding that this report was released before the Risk Management Agency or the private insurance companies were given an opportunity to read the report or offer rebuttal to the main points.  I find the omission of such a review process rather disturbing, since such an adversarial approach tends to undermine the intent of the report, which is to improve the underlying program through the cooperation of interested parties.  I hope that everyone involved will look beyond this inauspicious beginning, and begin a constructive conversation in the course of today’s hearing.

If there are indeed problems in the basic program, they must be resolved before additional money is allocated for expanding coverage to include livestock or other changes are made.  Certainly, the the report’s assertion of potential conflicts of interest, inadequate quality control, and need for additional research on new policies are serious matters, and deserve further attention.

However, the report implies that RMA has the ability to impose unilateral changes in the risk-sharing load between the insurance companies and the government.  In fact, risk allocation occurs through the Standard Reinsurance Agreement, a negotiated document which cannot be easily changed.  In addition, it is unfair to characterize the profitability of the crop insurance industry based on the years between 1995-98, because that period does not include a year in which a widespread natural disaster occurred.

At the end, we need to do the best job we can in designing and implementing a program which is fair and affordable to farmers, offers companies and agents a chance to make a living, and does not impose huge costs on taxpayers.  However, we should not burden this program with undue expectations--it is not, and was never intended to be, the sole policy instrument providing an income safety net to American farmers.  We should keep these criteria in mind as we proceed with crop insurance reform over the next several months.