Iowa Public Television


Risk Management Agency Catches Insurance Fraud

posted on June 16, 2006

Hello, I'm Dean Borg. Mark Pearson is off this week. Farmers in the southern plains are enduring some of the driest conditions in decades. In Kansas, where 80 percent of the winter wheat crop is rated fair to very poor, yields are as low as 15 bushels per acre and some fields may not even be harvested. Fortunately, much of the acreage is covered by crop insurance. The Federal Crop Insurance Corporation was established in the 1930s, when the combination of the Great Depression and record drought threatened the agrarian backbone of America. In 1996, the system was privatized and the Risk Management Agency took over administration of the program. Today, more than 200 million acres are covered by crop insurance, but critics claim the program is prone to fraud and abuse. This week, public and private officials updated members of Congress on their efforts to police the program.

Risk Management Agency Catches Insurance Fraud

Since the days of the dust bowl, crop insurance has been part of the safety net that farmers rely on to survive hard times. Today's crop insurance program continues to help farmers but with every federal program there is always someone who will attempt to abuse the system.

In 2005, the Risk Management Agency, or RMA, provided $44 billion of insurance coverage on 246 million acres. The cost to taxpayers was $2.7 billion which included an estimated $117 million dollars in fraud, waste, and abuse. To its credit, the RMA did manage to catch $300 million in fraudulent claims between 2001 and 2004.

Eldon Gould, USDA-RMA: "The federal crop insurance program itself is working as it was intended and is working well. Program integrity is maintained through prevention, detection and enforcement. Because they share in risk, the approved insurance providers have a vested interest in working with us to prevent fraud, waste, and abuse."

Even so, a 2005 General Accountability Office report identified some problems with the RMA.

Daniel Bertoni, GAO "While RMA has taken actions to enhance the program through enhanced data-mining, field contacts with farmers, and other means, weaknesses remain in four key areas: field inspections, data mining, quality assurance, and the imposition of sanctions."

The report also revealed that crop insurance fraud was committed in a number of ways including false planting reports, fake weather damage claims, and collusion between farmers and insurance agents.

Some of the fraud likely slipped through the cracks due to the limited RMA staff of 530 and, as pointed out in the GAO report, lack of communication between public and private agencies overseeing the program.

RMA officials have requested 15 additional agents and have pledged to enforce program guidelines more rigorously.


Tags: agriculture crops fraud insurance news