WICHITA, Kan. — Thousands of farmers are filing insurance claims this year after drought and triple-digit temperatures burned up crops across the nation's Corn Belt, and some experts predict record insurance losses, exacerbated by changes that lowered some growers' premiums.
G.A. “Art” Barnaby, a Kansas State University Extension specialist in risk management, estimates underwriting losses on taxpayer-subsidized crop insurance will hit nearly $15 billion this year. He expects a staggering $25 billion in crop insurance claims to be filed by growers across the nation, driven primarily by one of the worst droughts in the U.S. decades. His loss estimate is based on a loss ratio of $2.50 for every dollar paid in premium.
The U.S. Department of Agriculture's Risk Management Agency made changes to the insurance program in the past year that meant farmers in some states paid smaller premiums for corn and soybeans. The agency also adjusted yields for those crops upward to reflect trends, Barnaby said.
“Anyone that is concerned about whether this will be sustainable over time will have to ask the question whether this was a good idea to cut rates,” said Barnaby, who 20 years ago helped develop the insurance program. “Now, as a farmer, I like paying a lower rate. But my guess is the rates were not cut that much to be noticeable, but in aggregate they do make a difference.”
The rate reductions were based on assumptions that new technology would eliminate or reduce big losses, he said. “So it is ironic they got hit the first year out.”