RMA Lowers Some Crop Insurance Premiums

Rate adjustments are based on an independent study and peer review.

Published on: Nov 29, 2011

Crop insurance premiums will be lower for many corn and soybean producers in 2012, thanks to updated rating methodology.  USDA Risk Management Agency Administrator Bill Murphy made the announcement on Monday, saying that overall it would be about a 7% reduction for corn and 9% for soybeans.

In the big crop insurance states, the reductions will be greater, averaging 12 to 13% for corn in Iowa, Minnesota and Indiana.  Murphy says the rate adjustment is based on findings of an independent study of RMA loss ratio data before and after 1995.

"Prior to '95 our historic loss ratio was about $1.40; for every dollar in premium we took in we paid out about $1.40 or $1.43," Murphy said. "Since that time it's been around 84 cents, so we all have seen this major change that has occurred."

That change, according to Murphy, is due to improvements in crop insurance policies, a steady increase in the amount of corn and soybean acreage covered, and advances in production technology.

"This year is a prime example," Murphy said. "Look at the losses we are looking at this year and remember the spring we had. In Ohio a lot of the corn didn't get planted until the last planting date. That went across all the way up into North Dakota, yet they for the most part are meeting their APHs so I think you have to look at how the world has changed as far as corn and soybean production goes."

National Corn Growers Association President Garry Niemeyer, a corn farmer from Auburn, Ill., says they are pleased to hear farmers will no longer be facing the continued widening gap between the loss for corn and the premiums charged to growers for policy coverage. He says that this is a day long-coming.

"Our farmers have historically paid more than their fair share of crop insurance premiums and we are pleased to see this is finally coming to an end," Niemeyer said. "NCGA has been working on this issue for the past eight years and we will continue to work with USDA as they implement these new premiums for the 2012 crop year."

Further downward adjustments in premiums beyond the 2012 crop year are a possibility pending the outcome of additional RMA analysis. The agency plans to review its ratings methodology for wheat, cotton, grain sorghum and potatoes, but says any premium reductions for those commodities won't be available before the 2013 crop year.