U.S. Will Continue to Write Crop Insurance

The Federal Crop Insurance Corp. will continue to provide direct all-risk insurance to farmers but also plans to overhaul the program, including cutting personnel, the Agriculture Department said Tuesday.

On March 11, the FCIC proposed to abandon its direct writing of crop insurance policies and become strictly a “reinsurance” company. Sales and service of crop insurance policies would be left to private commercial companies reinsured under agreement with the agency.

But FCIC manager Merrit W. Sprague said direct writing of insurance would continue, although recent estimates show that more than 70% of this year’s business will be written by private companies reinsured against catastrophic losses by the federal agency.

The balance of FCIC’s business is handled by Master Marketers, agents for the sales and service of the agency’s direct crop insurance policies.

Sprague, whose announcement was issued here and in Kansas City, said the decision not to convert completely to reinsurance was based on several factors, “including the Administration’s commitment that crop insurance be available to all farmers as directed by the Crop Insurance Act of 1980.”

Sprague said that FCIC employees can anticipate cutbacks in the future and that “we fully intend to follow up on the commitment to scale down the federal operation and make it more reflective of the shift in business to reinsurance operations.”

Under the crop insurance program, up to 30% of farmers’ premiums are paid by the federal government. On the average, including various levels of coverage, the premium subsidies cover about 25% of the payments.

The Reagan Administration’s proposed budget, sent to Congress earlier this year for the fiscal year that begin Oct. 1, included a plan to phase out the premium subsidies by 1990. That schedule has been modified in a Senate budget compromise worked out with the White House, but agency officials say the plan is still up in the air.