The 2012 drought is nearing historic proportions. It shows no signs of giving in any time soon. Besides sizing up level of crop damage, farmers are beginning to wonder if crop insurers will have enough money to meet crop insurance policy commitments.
On Wednesday crop insurers reassured farmers that companies will have the money necessary to quickly pay out claims in 2012, even amid record payouts last year.
For every dollar of premium that insurance companies write, they have a regulatory requirement to have the private financial backing to cover catastrophic losses. Each year, the Federal Crop Insurance Corporation reviews and approves every company's plan of operations to ensure that adequate capital is available, explains Tom Zacharias, president of National Crop Insurance Services (NCIS), the industry's trade association.
"We've always been there for our farmer customers when they've faced tough times in the past and we'll continue to be there," he says.
Last year was marked by widespread weather-related loss and a record $11 billion in indemnity payments. It should serve as a good model for what farmers can expect this year.
Claims typically paid in 30 days
In 2011, most payments to farmers on the policies they purchased were processed within 30 days of claims being finalized. Such efficiency required a highly trained and skilled force of agents and claims adjusters, Zacharias pointed out.