GAO Recommends Lowering Crop Insurance Expected Rate of Return

The Government Accountability Office is recommending that Congress considers directing the Department of Agriculture to adjust the expected rate of return for crop insurance.  In 2010, USDA negotiated a set rate of return with crop insurance providers.  The return is how much companies can profit from insurance policies.

In a report released earlier this month, the GAO found that the expected rate of return was too high compared with market conditions.  In 2010, USDA negotiated with insurance companies to set a 14.5% target rate.  According to GAO's analysis, which updated information in the study for 2009 through 2015, the reasonable rate of return declined, averaging 9.6%.

By reducing the expected rate of return, GAO says the federal crop insurance program could save hundreds of millions of dollars a year.

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