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Options, new programs augment basics of crop insurance coverage

Jan. 24, 2013 | 0 comments

Following a record payout on crop insurance premiums in 2012, growers are gearing for crop insurance protection in 2013 by attending winter information meetings sponsored by companies and organizations which write policies as the March 15 signup deadline for spring crops approaches.

At a mid-January meeting here hosted by Premier Insurance Solutions, LLC, agent Jenny Brown of the firm's satellite office at Cascade reviewed the basics of crop insurance coverage and identified the changes available in 2013 and a one-time provision that applies for this year.

To the question of whether there are enough reserves to pay the record total of claims arising from the 2012 crop year, Brown pointed out that industry regulations require all companies in the crop insurance business to have enough money to cover two years of a 200 percent loss ratio. As necessary, this is accomplished through policies with reinsurance underwriters based in Europe, primarily London, she added.

Of the 14 crop insurance companies which operate in Wisconsin, Premier Solutions writes policies for its clients with five of them - Rural Community, Rain and Hail, Great American, NAU Country, and Farmers Mutual. Brown explained that Premier Solutions has chosen them because of their financial strength and their commitment to on-farm service, which is one way Premier strives to differentiate itself in the field.

Premier Solutions has clients in Wisconsin and eight other states, where many of the clients also either own or operate land in Wisconsin or have some other connection to the state, company co-owner Craig Ladwig noted. As of Jan. 10, Premier's clients in 2012 had received more than $30 million in claims on some combination of crop yield or income losses.

For 2011, growers insured through Premier's 16 agents paid nearly $8 million in premiums and the payout on losses was less than $5 million. Premiums paid by the company's clients in 2012 were approximately $9 million.


Brown noted that, because of the federal subsidies on crop insurance, all agents and companies must offer the same price and same products for multi-peril crop insurance. She emphasized that the applications (due by March 15) must have a match between the insured entity, the crop reports to the Farm Service Agency, and the tax identification number.

That application will indicate the crop to be insured, the type of protection (revenue or yield), the coverage level (50-85 percent are typical), the unit makeup of the insured crops (basic, optional, or total enterprise), and any options. The options are the county by county trend adjustments for corn, soybean, and wheat yields, the yield adjustment which reduces the long-term effect of very low yields, and coverage for organic crops.

A county by county yield trend adjustment, available for an extra fee, is an option introduced in 2012 for setting (increasing) the actual production history numbers. Based on improved genetics, it is available for corn, soybeans, and wheat in Wisconsin's counties except for those in the northern two or three tiers.

Full credit for the trend adjustment can be earned by having at least four years of valid actual production records from the past 12 years. In many Wisconsin counties, the maximum adjustment is averaging close to 1.5 bushels per acre per year (up to 4) for corn and a bit over .5-bushel for soybeans.


"A big question for 2013" that some growers are facing is whether corn planted after a cover crop now in the ground can be insured, Brown observed. An exception granted by the U.S. Department of Agriculture's Risk Management Agency for 2013 only, because of the shortage of forage feeds around the country, will allow crop insurance coverage on the corn if the cover crop is harvested or grazed before May 10 and was not budded or headed by that time, she explained.

Because of the very warm early spring weather in 2012, some growers were tempted to plant crops before the earliest date for which they could maintain eligibility through crop insurance on costs of replanting if that was necessary, Brown pointed out. To address that, Rural Community is one insurance carrier that is offering an endorsement to growers who plant before the earliest currently eligible date for replant coverage and then be able to receive payments of up to $50 per acre for replanting.

Brown reminded growers to be aware of the earliest and latest planting dates that affect coverage for crops. In Premier's primary service area of Wisconsin and northern Illinois, there are three different final planting dates for corn and two for soybeans in order to avoid a daily loss of one percent of the crop insurance guarantee. There is no coverage for soybeans planted after green peas are harvested.

Ladwig and Brown urged insured growers to be especially careful on the timing and procedures involved with the replanting of a crop. They mentioned the number of acres or percentage of total crop that must be affected, the observance of initial planting dates, a requirement that the projected yield without replanting be less than 90 percent of the actual production history on the insured entity, and the need to inform the insurance agent or crop adjuster before field work pertaining to a replanting is done.


In addition to the standard multi-peril packages of crop insurance, the industry offers hail insurance privately at competitive rates on acre by acre policies with no deductible, Brown noted.

Those policies, for which any changes are also due by March 15, not only cover losses from hail damage but also from fire, vandalism, and transportation up to 25 miles from the field along with options for damage incurred from wind and lodging.

Another separate recently introduced type of coverage is total weather insurance. Designed to cover losses from drought, excessive moisture, heat stress during day or night, and late or early frost, it is relatively expensive with minimum rates of about $35 per acre in Wisconsin but suitable for policies obtained for spotlighted acres at highly susceptible sites, Ladwig suggested.

Ladwig and Brown also described the fairly new enterprise unit plus coverage for corn and soybeans that is offered by Great American Insurance.

Ladwig is leery about that hybrid policy option, noting that payments are not made on it, along with a premium still being due, if a payment results from the standard enterprise unit coverage. It was indicated that the extra coverage would be suitable if an operator has a combination of irrigated and non-irrigated crops.


Brown also reviewed the provisions which apply for bringing Conservation Reserve Program land back into production, to newly broken land (not in a row crop in any of the previous three years), the seeding of forages in the spring, the earlier billing and payment dates for spring planted crops, and how to report fraud or file a complaint about abuse of the crop insurance program rules.

Ladwig and Brown emphasized the importance of complying with deadlines and rules and of keeping in touch with one's agent to report cropping changes that would affect insurance coverage and to ask questions along the way.

Ladwig said it is possible to obtain crop insurance on land not certified for inclusion in Farm Service Agency (FSA) programs but noted that those acres do not qualify for disaster relief payments. The best practice in most cases is to be consistent on both crop insurance and FSA in how one treats the cropped acres, it was suggested.

Keeping production records for at least four years (with a hard copy stored in a safe place) and having appraisals to document losses are essential for administering crop insurance, Brown reminded growers. She urged early contact with agents and adjusters to avoid having to leave test strips that would have to be harvested outside of the normal cycle.

Ladwig pointed out that a claim for $200,000 or more on a single crop within one county would trigger an audit instigated by either the insurance company or the Risk Management Agency.

For an audit, the grower must have acceptable production records such as weight slips, scale tickets, load numbers, a third party measurement, or combine yield monitors within three percent accuracy for the past three crop years.


Despite the massive crop production losses and record insurance payments in 2012, Brown reported that it might be surprising to learn that the premium rates are poised to decrease overall in Wisconsin for 2013 - about 5-8 percent respectively for corn and soybeans - although they might increase in 2014 or later years as a result of the 2012 losses.

Brown explained that the annual premiums are based on 40 years of crop loss statistics using the entire nation as the risk pool. The 2013 rates are lower in some states, including Wisconsin, because they were set before the extent of the 2012 losses was documented.


The meeting here was the first of 18 being held in Wisconsin until Feb. 19 by Premier Solutions. The company has 10 regional offices, has a mailing list for nearly 1,500 bi-annual newsletters, operates a Web site at www.PremierInsuranceSolutions.com, awards four $1,000 scholarships per year, and provides additional community support with the purchase of youth project meat animals at county fairs.

In addition to its main office at Wales, Premier Solutions has agents at Cascade, Osseo, Baraboo, Burlington, Elkhorn, Mt. Horeb, Tomah, Monroe, and Monticello.

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