Summary: Since the 1930s, the federal government has offered subsidized crop insurance to farmers. After the program was expanded in 1980 to include more crops and locations, however, it paid out about $3 billion more in claims through 1994 than it received in premiums from farmers and the federal government. To correct this imbalance, Congress required that, by October 1995, the program reduce its projected ration to at least $1 in premiums to $1.10 in claims paid. In other words, insurance rates were to cover at least 91 percent of the anticipated claims--termed "91-percent adequacy." The Agriculture Department (USDA) estimates that the government's costs for the program will total $1.5 billion for fiscal year 1996. This report examines whether USDA (1) set the insurance rates to achieve the requirement of 91-percent adequacy, (2) reduced the losses caused by high-risk farmers, (3) based payments to farmers for claimed losses on their actual production history, and (4) set deadlines for farmers to buy crop insurance before planting their crops.
