MPCI policies have gained popularity and success through a unique public-private partnership between the federal government and private insurance companies. Operated under the Federal Crop Insurance Program, MPCI policies combine the regulatory authority and financial support of the federal government with the efficiencies of the private sector.
Under this arrangement, the private insurance companies that sell crop insurance are fully responsible for administering and operating the program while the federal government oversees, regulates and subsidizes it. The insurance companies are required to sell a policy to any eligible farmer (link to the section on eligibility) who requests coverage, and to sell it at a premium rate set in advance by the Risk Management Agency (RMA).
In return, as a way to keep premium costs affordable for farmers, the federal government allocates significant premium subsidies to the farmers -- generally between 50% and 80% of the total premium cost, depending on coverage. On top of that, the federal government also pays subsidies directly to the private insurance companies in return for the services they provide. This is done to help offset hefty administrative fees and related costs, which would otherwise be reflected in higher premiums for the farmers.
Multi-Peril Crop Insurance (MPCI) provides protection from a variety of naturally occurring perils or hazards. Although policies vary somewhat, most provide coverage against the following:
Adverse weather conditions
- Failure of the irrigation water supply, if applicable, due to an unavoidable cause of loss occurring within the insurance period
- Plant disease*
- Wildlife Plant disease*
- Volcanic eruption
* Does not include damage due to insufficient or improper application of insect or disease control measure