Tag Archives: crop insurance

Unhappy Customers

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Insurance has long battled a negative public image.  Let’s face it.  Insurance is an intangible product that provides nothing that even remotely resembles instant gratification (to which our 21st century society seems to be addicted), and which we hope we never need to use but expect ironclad full coverage protection if/when we do need to use it.  What could possibly go wrong?

This is a troubling reality because the insurance product does more good for society than almost any other product when disaster does strike.  Insurance rebuilds lives and businesses.  Insurance soothes when pain runs deep.  Insurance quite literally saves lives.  Of course, that’s when everything works as planned, which is most of the time.  When insurance professionals properly match insurance coverages with client needs and takes the time to sell consultatively.  And when consumers take responsibility for understanding their risks and risk tolerances and seek to be informed purchasers rather than assuming that the insurance industry is packed with employees capable of mind-reading.  When it all works, it is beautiful.  When it doesn’t, the press kicks into high gear to vilify greedy and mean-spirited insurance companies.

I recently came across an article that specifically highlighted the rise (or decline, if you prefer) of the health insurance industry to among the most-hated industries in America.   The article cited work done by the American Customer Satisfaction Index, and quoted its director, David VanAmburg – who just happens to be my former college roommate and longtime friend.  David does good work, so I place significant credibility on the ACSI’s findings.  The natural inclination is to blame the increase in customer unhappiness with the health insurance industry on the Affordable Care Act (a.k.a. ObamaCare), but the ACSI findings didn’t find any direct evidence of this, though Mr. VanAmburg acknowledges that the influx of insureds under the ACA could be straining health insurers’ customer service resources.  Most of the complaints seem to arise from bad experiences with health insurer call centers and the (limited) choice of insurance plans – many of which are saddled with higher premiums and higher deductibles.

For all the good that the insurance industry does for people and society, we clearly have our work cut out for us.  Rebuilding lives that are torn apart by accidents and disasters, getting business back open again after a fire, providing the resources to care for the sick and injured, are all noble and admirable benefits provided by the insurance industry.  How can any industry that provides such benefits be among the “most hated” industries?  We’ve got some work to do.

On a sidenote, I recently blogged about federal government budget cuts in the crop insurance program.  Being the economic libertarian that I am, I questioned whether or not these budget cuts were really so tragic to the crop insurance industry or the agricultural interests they served.  Well, it’s all a moot point now, assuming President Obama signs the recently passed highway bill which restores the $3 billion that was initially cut from the crop insurance subsidy program.  Eh, what’s another $3 billion in a half-trillion dollar budget deficit anyways?

Crop Insurance Cutback

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It has been a big week for political news.  We had the election of a new Speaker of the House in Rep. Paul Ryan.  We had a Republican presidential candidate debate that was allegedly tainted by media bias.  We had a two-year federal budget deal that presumably takes debt-ceiling crises and government shutdowns off the table until 2017.  But there’s something within the budget deal that has received relatively little attention.  Lurking in this budget deal is a $3 billion cutback (over ten years) in the federal subsidies for crop insurance.

Naturally, this cut (which reportedly came as a complete surprise) has midwestern legislators up in arms, characterizing the cut as “devastating” to the crop insurance industry.  I am the son of a farmer, and I fully understand the nature of the economic risk that farmers and ranchers face.  Droughts and storms have wreaked havoc on farmers in recent years.  The federal crop insurance subsidies support the availability and affordability of crop insurance.  When I do the math, a $3 billion cut over ten years is a reduction of $300 million per year, for a program costing north of $9 billion per year, which is roughly a 3% cut.  Devastating?  Really?

Opponents argue that farmers have already endured a $12 billion cut in the crop insurance program since 2008, and a further erosion of federal crop subsidies in last year’s farm bill.  There is also the argument that this could have a long-term negative effect on the viability of the U.S. agricultural economy and our affordable food supply.  Farmers in some parts of the U.S. have been challenged with extreme droughts and I’m sure that crop insurance cutbacks must feel like yet another whack to the head for them.

As sympathetic as I am to the agricultural business, my personal skepticism about government intervention in any market causes me to wonder if it isn’t a long overdue weaning of the industry off of government supports.  I remember my father declining to participate in subsidy programs in the 1970s and 1980s that could have paid him handsomely but he felt they were “government nonsense” that served no practical purpose other than subjecting him to a myriad of government rules and bureaucracy.  These latest crop insurance cuts hardly strike me as “devastating” although perhaps the cumulative effect with previous cuts may appear to be devastating.  Then again, government economic interventions tend to be highly distorting over time and so perhaps it is time to “devastate” this free market distortion and allow the free market to work as it should once again.

Agree or disagree?