Crop insurance exec testifies before U.S. Senate committee
The United States Farm Bill is up for renewal at the end of 2023.
NAU Country Insurance Company’s President Jim Korin recently testified on the significance of the crop insurance industry to the United States Senate Committee on Agriculture, Nutrition and Forestry-Subcommittee on Commodities, Risk Management, and Trade’s recent hearing.
“Crop insurance is a crucial risk management tool for farmers,” Korin said, “and it has been successful due to its public-private partnership and support from Congress.”
Federal crop insurance in the U.S. covers approximately 135 crops, spanning nearly 400 million acres of agriculture production nationwide. In addition to protecting farmers against financial losses caused by various threats that can adversely affect crops, it plays a vital role for the American people by maintaining price stability in the agricultural sector, promoting food security, strengthening rural economies and reducing reliance on government aid.
With the support of multiple competing companies, independent agents and thousands of employees, crop insurance covers over 90% of production agriculture in the U.S.
Korin emphasized three key principles that he believes underpin the success of crop insurance: flexibility, affordability, and availability.
Flexibility
Farmers have the ability to tailor coverage to their unique operational and risk management needs, with options ranging from individual-field to whole-farm to county-based coverage. Plans offering coverage from 50% up to 95% ensure that crop insurance is accessible to farmers of all sizes and financial situations.
Affordability
Crop insurance contributes to maintaining a safe and affordable food supply, ensuring that farmers are equipped with a safety net to navigate adverse growing seasons. The partnership between the private sector and the government, sharing risk and providing premium support, allows farmers to afford the coverage they require. This mutually beneficial arrangement also offsets costs to taxpayers, enabling the expansion and sustainability of crop insurance.
Availability
The private sector’s involvement in the delivery of crop insurance is vital for its continued success. Companies like NAU Country invest billions of dollars in rural communities, contracting agents, expanding technologies, and assuming significant capital risks. These investments provide coverage that supports the nation’s producers, making funds available promptly when claims are made.
While crop insurance has proven effective, Korin also identified areas for improvement.
Enhanced coverages
Crop insurance carriers are actively collaborating with producers and commodity groups to enhance and expand coverage options for crops that safeguard the future of production agriculture. Initiatives like the Enhanced Coverage Option (ECO) policy and the Hurricane Insurance Protection-Wind Index (HIP-WI) endorsement have already shown promise in providing additional coverage during natural disasters. Making these policies more affordable will further strengthen their effectiveness and reduce the need for ad hoc assistance.
Process refinement
Continued refinement of the 508(h) process, which allows for innovative offerings in crop insurance, can enhance the delivery and effectiveness of the program. Collaborative efforts with the Risk Management Agency (RMA) aim to streamline the timing of new policies coming to market and improve the development of new 508(h) products, ultimately reducing costs and increasing market uptake.
Administrative reimbursements
The crop insurance industry has operated on stagnant administrative reimbursements since 2015 while experiencing significant wage inflation and cost increases. The industry supports a simple inflationary adjustment to ensure equitable relief and benefit program delivery for all farmers.
Environmental practices
American farmers have already adopted various environmentally friendly practices, such as no-till farming, cover crops, variable-rate fertilizer and chemical application, and the use of cleaner-burning tractors. Farmers purchasing crop insurance must certify compliance with land management practices for highly erodible lands and wetlands, administered by the USDA’s Natural Resources Conservation Service (NRCS).
While further adoption of carbon-sequestering farming practices is seen as beneficial, it is cautioned that non-market incentives should come from separately funded initiatives to avoid detracting from the crop insurance program. Crop insurance is considered vital to the survival of farmers and ranchers, as they can only implement such practices if they remain in business.
Actuarial soundness
Changes that exclude individuals from eligibility would undermine the actuarial soundness of the program. Crop insurance’s effectiveness relies on the diversity of the risk pool, including farmers and ranchers of all sizes from every county in the country. Diluting the risk pool could increase premiums for those who remain eligible.
Finally, Korin highlighted the historical roots of NAU Country Insurance, which reach back to the inception of crop insurance and its U.S. federal government partnership. Crop insurance “continues to evolve to meet new agricultural challenges and provide farmers and ranchers with the tools they need to succeed,” he said.
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