July 8, 2010

US crop insurance firms to accept profit cuts

Agriculture Secretary Tom Vilsack says he expects most, if not all crop insurance companies to sign an agreement that will reduce the industry's profits.

"This is a fair deal and it's reflected in the fact that we're seeing a number of companies being prepared to accept the terms and conditions," Vilsack said.

Sixteen senators, including leaders of the Senate agriculture committee, appealed to Vilsack last week for last-minute changes to the agreement, which companies must sign if they want to continue selling the federally subsidised insurance.

The senators said it was unfair to cap agent commissions, as the agreement would do, since they, unlike the companies, do not get to negotiate with the Agriculture Department over their compensation.

"We can think of no precedent for the government restricting how much companies can compensate a specific class of workers, whether they are direct employees or independent employees of indenet contractros, as is the case with most agents," the senators wrote.

They also complained that the US$6 billion in cuts to the insurance programme will leave lawmakers with less money that they could use in writing the next farm bill. In 2008, lawmakers shifted some money from crop insurance into other programmes that were higher priority. By slashing the programme further, the administration is shrinking that source of potential funding.