Crop Insurers Object To Effort To Slice Profits
US - Crop insurers will battle with the Obama administration over its plans to slash the industry's growing profits.
18 January 2010
2 minute read
Representatives of the companies that sell the heavily subsidised insurance policies are set to meet with the US Department of Agriculture, according to DesMoinesRegister.com. . The insurers' message: The cuts could force companies to pull out of less-profitable regions.
"This government is running around looking for ways to create jobs," said Robert Parkerson, president of National Crop Insurance Services Inc., an industry trade group. "Yet, on the other hand, they seem to be threatening rural America for working."
One of the industry's leading allies in Congress, Senator Charles Grassley, Iowa, said he believes the administration wants to use the $4 billion in savings it would get from the cuts to increase spending for child nutrition programmes, including school lunches.
USDA officials won't say what they want to do with the money or even how much money they believe the cuts would generate. However, the department argued that the industry is making far more money off the system than is justified.
A study done for the USDA in 2009 said the companies had been earning a return of as much as 28 per cent in recent years - about twice what would be considered reasonable for the insurance business. Payments to the industry have doubled from $1.8 billion to $3.6 billion in the past three years as commodity prices have risen. The number of policies has dropped 200,000, to 1.1 million, the USDA said.
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