Program "delivery" generally refers to selling and servicing policies. Delivery subsidies are not based on actual delivery expenses. They are paid as a separate government subsidy to AIPs. The SRA sets their amounts as follows:
A&O: for delivery of buy-up coverage (lower deductibles), equals between 12% and 21.9% of premium, depending on policy type. CAT LAE: for delivery of catastrophic level coverage (higher deductibles), is fixed at 6% of premium. A&O Cup and Cap

The 2011 SRA and subsequent SRAs established a minimum (cup) of approximately $1.0 billion and a maximum (cap) of approximately $1.3 billion per year for A&O subsidies—subject to an adjustment for inflation from 2011 to 2015—to help stabilize A&O amounts. Delivery Subsidy Outlays

From 2007 to 2016, annual delivery subsidies (A&O and CAT LAE combined) averaged about $1.5 billion and represented about 15% of total premium ( Figure 3 ). Since the A&O cup and cap first went into effect in 2011, the total amount spent on delivery subsidies (A&O and CAT LAE combined) has exceeded the A&O cap every year ( Figure 3 ), reflecting policies, coverages, and SnapBack that are not subject to the A&O cup and cap ( Table 2 ). AIP Reporting of Actual Expenses

Limited data is available on the actual expenses of AIPs. RMA requires AIPs to report actual expenses, but RMA does not publish the reported expense data. CRS is aware of three publicly available sources for information on AIP expenses: (1) annual statements from state departments of insurance, (2) Form 10-K and other reports submitted to the U.S. Securities and Exchange Commission (SEC) by AIPs that are owned by publicly traded companies, and (3) AIP survey data used in studies sponsored by the crop insurance industry. Policy Issues

Delivery subsidies accounted for $14.8 billion (20%) of government spending on the federal crop insurance program during the crop years 2007-2016. The amount of these subsidies is based not on actual expenses incurred by AIPs but on percentages of premium set in the SRA that vary by policy type and coverage level. The available data on actual delivery expenses is not easily matched with A&O delivery subsidies and leaves unanswered the question of whether current subsidies are deficient, sufficient, or excessive.
In the federal crop insurance program, "delivery" generally refers to marketing policies, processing applications, collecting premiums, and adjusting claims. Delivery subsidies accounted for $14.8 billion (20%) of federal spending on crop insurance during crop years 2007 through 2016. The amount of delivery subsidies is not based on actual expenses incurred by Approved Insurance Providers (AIPs) but is instead based on percentages of premium that are established in the Standard Reinsurance Agreement (SRA). The percentages vary by policy type and coverage level. Delivery subsidies are not taken from total premium. They are paid as a separate government subsidy to AIPs. The SRA sets their amounts as follows:
Administrative and Operating (A&O) subsidy, for delivery of buy-up coverage (lower deductibles), equals between 12% and 21.9% of premium, depending on policy type. Catastrophic Loss Adjustment Expense (CAT LAE), for delivery of catastrophic level coverage (higher deductibles), is fixed at 6% of premium.
From 2007 to 2016, total annual delivery costs (A&O and CAT LAE combined) averaged about $1.5 billion in current dollars and represented about 15% of total premium. The 2011 SRA and subsequent SRAs established a minimum (cup) of approximately $1.0 billion and a maximum (cap) of approximately $1.3 billion per year for A&O subsidies—subject to an adjustment for inflation from 2011 to 2015—to help stabilize A&O amounts. Since the A&O cup and cap first went into effect in 2011, the total amount spent on delivery subsidies (A&O and CAT LAE combined) has exceeded the A&O cap every year.
Limited data is available on the actual expenses of AIPs. The Risk Management Agency (RMA) requires AIPs to report actual expenses as SRA exhibits but does not publish the reported expense data.
CRS is aware of three publicly available sources for information on AIP expenses: (1) annual statements from state departments of insurance, (2) Form 10-K and other reports submitted to the U.S. Securities and Exchange Commission (SEC) by AIPs that are owned by publicly traded companies, and (3) AIP survey data used in studies sponsored by the crop insurance industry.
The available data on actual delivery expenses is not easily matched with A&O delivery subsidies and leaves unanswered the question of whether current subsidies are deficient, sufficient, or excessive relative to the actual delivery costs of AIPs.