In some ways, the NASCOE proposal provides an opportunity to revisit the question of the advisability of uncritically outsourcing essential government functions to private enterprise.

It seems clear that the contention that outsourcing saves the government money does not come into play when it comes to crop insurance. According to NASCOE’s Informa study, having the private sector sell and service the federal crop insurance program costs money—as much as $2.5 billion a year. Even if it costs a bundle to install the management systems and train FSA employees to handle the federal crop insurance program, over a ten year period the savings have to be significant. On the other hand, ACCI references a 1989 Arthur Anderson study that reports government costs to be higher than private industry.

If having the private sector operate the crop insurance program may or may not save the government money, then the case for not shifting the responsibility for the program to the FSA rests on the argument that the crop insurance industry provides superior service. And that is one of the arguments they make, asserting that farmers prefer the services provided by private industry over government employees. They also cite a USDA Risk Management Agency study that shows an error rate in insurance payments of just 5 percent. NASCOE counters with the argument that because FSA relies on local farmer committees, abuses of the program are easier for them to spot.