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Crop Insurers Piling Up Record Profits

And unlike other insurers, which try to weed out bad customers and limit risk, the federal program agrees to take on any and all comers. In fact, to attract customers, the government charges farmers only about one-third of what it actually costs to cover the claims. Since 1981, subsidies to farmers for their premiums have totaled nearly $19 billion.

Finally, under an agreement with federal officials, crop insurance companies are allowed to shift their riskiest policies to the government. In the past eight years, the companies have made a total of $3.1 billion in profit as the government has lost $1.5 billion, an analysis of records shows.

"Crop insurance reform has become a good idea gone awry," said Jerry R. Skees, an agricultural economist at the University of Kentucky. "It's expensive, complex and inefficient."

Flocking to Cheap Insurance

In 1980, Congress turned to private insurance companies and their extensive networks of agents in an effort to expand crop insurance and save money on the billions that were being paid to farmers in emergency disaster legislation. Companies get into the program by applying to the government.

That year, lawmakers also introduced a subsidy to help farmers buy insurance, picking up about 30 percent of the premium.

Farmers flocked to the cheap insurance. Insured acres went from 45 million in 1981 to 101 million in 1990 to 240 million today. The number of crops covered has also increased.

Since Congress boosted subsidies for premiums again in 2000 -- the average is now 60 percent -- the crop insurance industry has collected record underwriting gains, or the profits left from premiums after claims have been paid. The $927 million insurance companies made last year surpassed the previous record of $690 million, set the year before. Overall, they have had record profits in four out of the past five years.

Keith Collins, the U.S. Department of Agriculture's chief economist and chairman of the federal board that oversees the crop insurance program, said the companies' performance has been "atypically good" in recent years.

Company spokesmen added that it is important to look at the history of the program, not just the recent results. "I think you have to look at 2002 and this year and 1993," said Scheef, referring to years in which the insurers lost money. Recently, he added, "I just think we had some good weather."

Since the insurance companies began administering the program in 1981, records show, they have suffered $139 million in losses in a few bad years while collecting more than $4 billion in profit during the good ones.

In many years, they have made large profits even when the government loses huge sums on crop insurance, a Post analysis found. For example, in 2001, the companies made $346 million, while the government lost $335 million.

Even in bad years, when everybody loses money, the government bears the brunt. In the drought year of 2002, the companies lost $47.4 million, while the government lost $1.1 billion.

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