Federal crop insurance is a product that most farmers agree they would never want to be without.
However, crop insurance falls far short of fully compensating a grower for the loss of the potential yield of a crop – and sometimes, if there are multiple years of disaster, of recovering enough to cover actual losses or plant the next year's crop.
That is precisely the problem that The Climate Corp. wanted to address when it introduced Total Weather Insurance about four years ago.
This year in Kansas, 78% of the wheat producers who had TWI policies have already received checks, said Jeff Hamlin with The Climate Corp.
Payments are automatic
The advantage of TWI, he said, is that payments are triggered by weather conditions and are automatic when adverse weather occurs.
The model uses a 2.5 square mile grid and historic weather data to come up with a model that determines when adverse conditions will impact potential yield in that grid.
When a farmer purchases a policy on his field, a computer file is generated for that field, allowing him to keep track online of where he stands on potential payouts based on his potential yield and the weather that has actually occurred.
"It's convenient for farmers that there is no need to call an adjuster or keep records of historic yields on a given field. The payout is generated automatically and the check comes in the mail," Hamlin said.
Hamlin said this year's payouts will be huge, but Climate Corp. will remain in sound financial condition.
"We are well covered and plan for all scenarios," he says. "The payouts are what is supposed to happen when bad weather occurs, which it did this year."
Additions for 2013
For the 2013 wheat crop, The Climate Corp. has added a fall protection drought policy, covering against continued drought.
"The policy covers the lack of rain during this critical period," Hamlin says. "It pays if it doesn't rain." It does not require farmers to plant the crop if conditions are never conducive to planting.
A second wheat product will be available to cover spring weather risks, which will give farmers an option to cover only those acres where wheat is established in the fall.
For more about Total Weather Insurance, see the September Kansas Farmer.