Crop Insurance payouts in the USA Rise as Climate Change Worsens Droughts and Floods

According to an analysis of federal data released by the Environmental Working Group (EWG), insurance payments to U.S. farmers in case of crop losses due to flooding and drought have increased more than threefold over 25 years.

The report reinforces concerns that insuring the nation’s crops will get more expensive for insurance companies, farmers and taxpayers as climate change drives more erratic weather events that disrupt agriculture.

The federal government pays about 60% of the nation’s crop insurance premiums through taxpayer subsidies, according to the Congressional Budget Office, and those premiums tend to rise as insurance payouts grow.

Insurance payments to farmers due to drought rose more than 400% between 1995 and 2020 to $1.65 billion, while payments due to excess moisture – like floods – rose nearly 300% to $2.61 billion, according to the nonprofit environmental group, which examined publicly available data from the U.S. Department of Agriculture.

Reuters reviewed the data. It showed a steady upward trend of insurance payouts over that period.

During the period analyzed by EWG, the number of insured acres grew just 84.5%, according to the data from the department’s Risk Management Agency, which administers the federal crop insurance program.

“As extreme weather has become more frequent, the climate crisis has already increased insurance payments and premium subsidies. These costs are expected to go up even more, as climate change causes even more unpredictable weather conditions,” EWG said in the report.

The report did NOT include data on the average increase in premiums over 1995. According to a 2019 USDA study, the cost of crop insurance could rise between 3.5% and 22% due to climate change. Farmers would need to adapt what and how they plant to keep up with rising costs.

Corn, soybeans and wheat are the most common crops that are insured.

Federal crop insurance requires that farmers meet minimum conservation standards. For example, they must not plant on land that is highly susceptible to erosion.

Anne Weir Schechinger (Midwest director of EWG) said that the standards should be stronger. “The program needs to be reformed so it encourages farmers to be resilient to extreme weather events that we know are ahead,” she said.