The United States Department of Agriculture (USDA) released the final draft of the new crop insurance plan. The plan that has been drafted three times will save the government $6 billion over the next ten years.
USDA Secretary Tom Vilsack announced at a press conference that the new plan will put $4 billion toward the deficit reduction and $2 billion for farm risk management programs and the Conservation Reserve Program.
â€œThere is a growing consensus in the country and certainly in rural areas that we need to be paying attention to the deficit, and this is our effort at agriculture and USDA to do our part in deficit reduction,â€ Vilsack said.
The plan will eliminate government payments that cause commodity programs to spike. This will be done by capping the amount of administrative and overhead expenses that crop insurance companies can collect from the government. Vilsack said agents can expect a $1,140 profit per policy.
Vilsack added that crop insurance companies were making too much profit off each claim. In 2009 the return equity was 26.4 percent. The industry claims this is necessary to have large reserves in case of emergencies in the agriculture industry.
Companies will still make profit off of policies, but the plan expects that the industry will report return equity around 14.5 percent.
According to Vilsack farmers will not pay higher premiums, some may see lower rates as a result of the new plan.
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