Adverse weather and volatile prices make farming a business of highs and lows. Crop insurance is designed to protect farmers from economic damages caused by everything from a radical decline in crop prices to the inability to plant due to drought.

History of Crop Insurance

Crop-Hail, or simply Crop Insurance policies were first sold in America in 1880 by private insurance companies, to protect farmers against the damaging effects of hailstorms. Then in 1935, following record-breaking heat, dust storms began and the dusty soil from plowed fields drifted and piled up like snowdrifts, killing crops and cattle. After this, in 1937, the federal government started the first national crop insurance program to help agriculture recover from the combined effects of the Great Depression and the Dust Bowl, and in 1938 the Federal Crop Insurance Corporation (FCIC) was created to carry out the program.

Private insurance companies became involved again in 1980 and by 1998 were the sole providers of crop insurance to the American farmer. The Federal Crop Insurance Reform Act of 1994 dramatically restructured the federal program, and made participation in the crop insurance program mandatory for farmers to be eligible for deficiency payments under price support programs, certain loans, and other benefits. Because of the mandatory participation, catastrophic (CAT) coverage was created, providing yield-based coverage with premiums subsidized by the federal government. Congress repealed the mandatory participation in 1996, but farmers who accepted other benefits were made to purchase crop insurance or else waive eligibility for any disaster benefits for that crop year. That same year the Risk Management Agency (RMA) was created in the Department of Agriculture to administer the federal crop program in the U.S. With built-in subsidies, participation grew to more than 180 million acres of insured farmland by 1998. With passage of the Agriculture Risk Protection Act (ARPA) in 2000, Congress enacted legislation expanding the role of the private sector, allowing entities to partner or contract with the RMA to research and develop new and innovative insurance products. ARPA also increased subsidies to farmers to encourage greater participation and added provisions designed to reduce fraud, waste and abuse.