Necessary Roughness

This is why “pro-business” or “anti-business” is not a valid indicator of a legislator’s views. Republican “pro-business” legislators are attempting to take out competition and reduce risk to big insurance companies, reports the Washington Post. This may be good for certain companies, but it’s bad for the market.

Federal crop insurance, one of the largest pieces of the nation’s costly and sprawling farm subsidy system, does not resemble any other insurance. Unlike firms that sell auto or homeowners insurance, the companies do not compete on the basis of price but on service.

And unlike other insurers, which try to weed out bad customers and limit risk, the federal program agrees to take on any and all comers. In fact, to attract customers, the government charges farmers only about one-third of what it actually costs to cover the claims. Since 1981, subsidies to farmers for their premiums have totaled nearly $19 billion.

Finally, under an agreement with federal officials, crop insurance companies are allowed to shift their riskiest policies to the government. In the past eight years, the companies have made a total of $3.1 billion in profit as the government has lost $1.5 billion, an analysis of records shows.

There is also pressure to prevent private insurers from competing in the marking with lower rates. Sometimes the “pressure” comes from people who don’t know it:

In February 2005, federal regulators received about 800 letters in response to a request for comments on the Crop 1 plan. The majority were from crop agents and insurance officials denouncing it. In some instances, the letters were identical except for the name. Four arrived from farmers in Kansas, one of whom was Landon Koehn of Marienthal.

When a reporter contacted Koehn, he said he didn’t remember the letter. But after a reporter read him its contents, he responded, “I can tell you this honestly: I didn’t write this letter,” adding, “I would know if I did.”

Perhaps “pro-market” vs. “anti-market” would be a better designation. This is definitely anti-market behavior one would expect from leftists. Subsidized farm insurance doesn’t help farmers: only farm insurance companies.