Recently, news broke nationally of a massive crop insurance fraud scheme where the crop insurance system was defrauded of as much as $100 million. Brandon Willis, Administrator for the Risk Management Agency for USDA in DC, feels confident that the crop insurance system will continue, but North Carolina producers will pay more in the long run:
“This is an insurance program, and by law an insurance program has to take in as premiums paid by farmers, the same amount as is paid out. The fraud and abuse increased indemnity payments, premiums will increase to cover those additional costs. That is why all farmers who play by the rules when a few don’t.
Generally speaking, we go by state, and we need to make sure that over a period of time, that by state, and by crop, the amount paid out to farmers is the amount paid in premiums. So if one state has excessive losses over time, the premiums will go up for farmers in those states.
I wont speculate on what Congress will do, but I think this year is the perfect example of why we have the crop insurance program. This year, before farmers ever planted their crops, these farmers paid $4 billion dollars into the program with no idea how their crop would turn out. And this year we have paid out about $16 billion in indemnity payments, but I think we are seeing that this money saves taxpayers money at the end of the day.
Historically, every time we would have disaster somewhere in the nation, cars would pass an ad hoc disaster program. These programs didn’t require farmers to pay any crop insurance premium. It was just a disaster payment. So this year teaches us that the taxpayer can save money through the crop insurance program.
This is an extensive situation and the risk management agency wants to make sure that its known we appreciate the partners. These convictions bring an increase of integrity to this program. This happened with some great people who worked with us to make sure this program remains free of fraud.”
Administrator of USDA’s Risk Management Agency, Brandon Willis