In 1938, Congress passed the Agricultural Adjustment Act (AAA) to implement the first federally-sponsored insurance program of crop insurance for America’s farmers. Significantly, the AAA created the Federal Crop Insurance Corporation (FCIC) to perform the task of providing crop insurance to farmers. Since 1938, many American farmers have avoided catastrophic losses in droughts and inclement weather by obtaining crop insurance, either directly through the FCIC or through private insurance companies that sell and service policies that are reinsured by the FCIC.
In 1980, Congress passed the Federal Crop Insurance Act (FCIA) and expanded the federal crop insurance program. Through the FCIA, Congress permitted private insurers to provide crop insurance policies alongside the FCIC. As a result, the number of farmers participating in the program greatly expanded after a series of droughts that affected the agricultural industry in the late 1980s and early 1990s.
From 1988 to 1998, the total amount of farmland insured under the federal crop insurance program grew to approximately 180 million acres covered. In 1996, Congress created the Risk Management Agency (RMA) to administer FCIC programs because of the growth in the crop insurance program. Today, crop insurance is available for many farmers to protect against the most catastrophic agricultural losses.
Crop insurance has emerged as a “mainstay” of farm risk management and future farm legislation. Producers have increased their reliance on crop insurance as a tool in their risk management portfolio. As a result, America’s producers must be prepared to address the potential legal issues that arise in the American production agricultural system, which relies increasingly on crop insurance.