January 2016 marked the launch of the industry's first What's Cropping Up newsletter. The idea was to speak directly to policymakers and the media to educate them on the basics of crop insurance.
Those early newsletters introduced concepts like "the risk pool," "moral hazard," "actual production history," and "actuarial soundness" - terminology that is readily available now via the industry's Crop Insurance 101 glossary.
Ten years later, people's understanding of the interworking of crop insurance has greatly expanded, as has its role in farm policy. However, we thought it would be instructive to revisit one term that has been central to crop insurance's growing popularity over the past decade.
That term, "Improper Payment Rate," seems particularly apropos in today's climate where high-profile examples of waste, fraud, and abuse have been unearthed in several non-agricultural programs.
One of the best measures of program integrity and efficiency is the Improper Payment Rate, which is the percentage of dollars paid out incorrectly, including overpayments and accounting errors.
Crop insurance's track record here is striking: The most recent improper payment rate for crop insurance is just 2.4%. And it's been below 3% for the past 10 years.
That is significantly lower than the overall rates for the federal government as a whole. For context, many federal programs routinely report double-digit improper payment rates in the latest government audits.
Why does crop insurance perform so well?
•Private-sector delivery with skin in the game. Crop insurance is unique among farm programs because private companies sell and service policies, adjust claims, and pay indemnities. Because insurers have dollars at stake, accuracy isn't just a compliance requirement, it's a business imperative.
•Investments in technology and data. The industry uses advanced data systems, satellite imagery, auditing tools, and well-defined procedures to get payments right the first time. These investments help reduce errors and improve program integrity.
•Strong oversight and continuous improvement. USDA oversight, internal corporate controls, and producer documentation requirements create multiple layers of quality control. And the recent federal budget reconciliation package provided additional funding to strengthen those oversight and integrity systems even further.
The result? A risk-management program that not only supports American agriculture in tough years but does so with a remarkable level of precision and accountability.
In an era when taxpayers and policymakers alike are rightly focused on efficient use of public funds, crop insurance stands out as a program that delivers accurately, efficiently, and responsibly.
EDITOR’S TAKE:
The concept of crop insurance was at first difficult for some to grasp. How can you insure against Mother Nature? Plus, initially it was quite expensive, and many farmers/ranchers were not signing on. That has all changed with farmers/ranchers now using it as a key risk management tool. It is refreshing to learn that the program is being run effectively, with very low improper payments. Compare that to a program like Medicare or Medicaid.
As a reminder, you have a great risk management tool with CAD Protect. As you’re probably aware, OEM warranties do not cover a vehicle used on a farm or ranch. CAD Protect was designed to fill that void and provide you with another tool you can use to attract and sell to your farm/ranch customers.
