Skyrocketing prices have proven a bonanza for crop-insurance sales agents, and regulators say they’re cracking down on schemes that build business for agents while reducing costs to farmers.
Caught in the middle are taxpayers, who heavily subsidize the U.S. crop-insurance system.
Regulators say schemes vary, but they essentially involve insurance agents rebating part of their sales commissions to farmers. Under federal law, all policies cost the same, no matter who sells them, so rebating commissions is one way for agents to gain business.However, rebating commissions violates state and federal law.
Some are pointing out the problems with the system:
Iowa State’s Babcock says crop insurance agents made an average of $650 per policy in 2006. This year, he said, the average is nearly $1,400.
Ultimately, Babcock said, the money comes from taxpayers who subsidize crop insurance.
“It’s a taxpayer scam, is what it is,” Babcock said. “The agents hate this when I point this out: 100 percent of the increase in commissions in the crop insurance industry comes from taxpayers.”