Posted 3/17/2015 17:48 (#4459841) Subject: Crop Insurance or money laundering?
After visiting with my crop insurance man, I have a few ponderings about exactly how crop insurance actually works with the subsidy levels and such.
Since the crop insurance subsidy is labeled as part of the farm bill, it is appropriated and allocated through this farm bill program.
With the new Whole Farm Revenue Protection quote sitting in front of me I am going to use some general numbers to try and portray my ponderance.
Say I am using the 75% coverage level and a premium liability amount of $513,000.
The premium rate is .206 for a total premium of $105,678
The subsidy percent is .800 for a subsidy amount of $84,542
So the producer premium is $21,136
The insurance company gets my $21,136 and is capped at a 12% profit margin which would give it another $12,681 of subsidy dollars for a total of $33,817.
The remainder of the subsidy dollars for this one policy, resulting in $71,861 gets returned back to the general fund to be used for whatever seems appropriate. Of course any and all claims for crop disasters or failures are paid from this general fund if the need arises.
That is roughly 67% of the farm bill crop insurance subsidy being returned (or never leaving) the coffers, just getting a name and use change. From the left pocket to the right pocket.