Farmers who filed crop insurance claims in 2014 collectively shouldered approximately $10 billion in deductible losses before collecting any payments, according to new data unveiled recently by the National Crop Insurance Services (NCIS).
When combined with the $3.9 billion spent to buy insurance coverage in 2014, farmers absorbed at least $14 billion in out-of-pocket costs, which is well in excess of the $9 billion in insurance indemnity payments that flowed to rural America.
NCIS President Tom Zacharias said this is significant for several reasons. “First, it shows that U.S. farmers are actively participating in the funding of their own safety net and minimizing taxpayer risk exposure,” he explained. “It also proves that crop insurance is working as designed by helping farmers recover – not profit – from disaster.”
This was even the case after the historic 2012 drought, when farmers shouldered $17 billion in deductible losses and premium payments and received $17 billion in insurance payments.
Because farmers have substantial “skin in the game,” crop insurance helps reduce the cost of U.S. farm policy while discouraging risky behavior that may otherwise occur if taxpayers picked up 100 percent of the tab.
Zacharias said that growers favor the current system over past farm policies because crop insurance can be tailored to a farm’s unique characteristics and because efficient private companies administer crop insurance and speed relief when it is needed most.
The newly released deductible calculation completed the 2014 crop insurance picture. Other relevant statistics were detailed in the May edition of NCIS’s Crop Insurance TODAY magazine and included:
- 1.21 million policies were sold, protecting nearly $110 billion in crop value.
- More than 294 million acres were insured, with a record 83.5 percent of those acres being insured at high coverage levels.
- Private insurance companies successfully and efficiently processed claims on more than 441,000 policies.
NCIS noted that the $10 billion in deductible losses only reflects losses for crops on which an insurance claim was filed. Farmers who shouldered smaller losses but did not file a claim are not included in the calculation.