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The American farmer faces increasing risk every day. Many of which, like hurricanes, hailstorms and other acts of nature, are out of their control. That is why it is essential that the American farmer is prepared for what may come.
The agricultural sector faces risk much like every other sector; however, when the fields are lost, so too is the food supply, and that effects everyone. Crop insurance is a product that aims to help the American farmer through volatile and unpredictable weather and other disaster events, but it is just one piece of the coverage puzzle.
“We’ve seen in the last several years farmers having real losses that weren’t able to be covered under the federally funded crop insurance program,” said Jim Korin, president of NAU Country Insurance Company, the crop insurance division of QBE Insurance Company.
The government, in turn, has conducted ad hoc disaster programs and payments to help the American farmer, but Korin said it isn’t enough.
“Farmers have loan payments to make on equipment and land. They need assurances that they have backing when trouble hits,” he said.
It is with that understanding, and a clear desire to aid and care for the American farmer, that Korin and the NAU Country team worked tirelessly to bring forth an Enhanced Coverage Option this year designed specifically for the risks American farmers face. Here’s what that journey to coverage looked like.
In addition to a volatile hurricane season and the ever-growing threat of severe wildfires drought and excess moisture, the American farmer has faced many challenges over the course of the last few years.
“Commodity prices have been depressed, for one thing,” Korin said. This, he added, has been the result of two main drivers: First, there has been increased pressure on the American farmer from foreign production of corn, soybeans and wheat. Secondly, trade wars and tariffs with China have contributed to a lag in the purchasing of U.S. product, including top commodities like corn and soybeans.
Coupled with natural disaster, the American farmer has suffered.
“We saw that, even with a bumper crop, many corn and soybean farmers could not make ends meet,” Korin said. “Land payments, mortgage payments, equipment and operating payments — these were piling up just as they were losing their fields. And all without a clear solution in sight.”
It was time for a change.
Korin, who was acting as chairman of the National Crop Insurance Services group at the time, challenged the industry to find alternative coverages that would give farmers higher levels of protections should disaster strike.
From there, he took his concerns to the annual meeting between NCIS and the Federal Crop Insurance Corporation. Members on the FCIC board encouraged Korin and his team to bring forth their ideas through a private submission platform.
Korin and the NAU Country team knew it had something valuable to offer American farmers, and they needed to work with speed and agility. During the brainstorming process, some in the industry did not think that higher levels of coverage could be found, but Korin persevered.
To bring a solid product to the FCIC board through the private submission process, NAU Country partnered with Watts and Associates Inc., an economic consulting firm specializing in risk management innovation.
“Watts & Associates have a history of putting in the research and bringing proposals through this type of submission process,” Korin explained. “They have a reputation of packaging products and coverages, and they understood the process.”
Through collaboration with Watts & Associates, as well as through ideas from agent groups NAU Country consults with internally, the Enhanced Coverage Option (ECO) was born.
ECO’s main goal is to help American farmers bounce back in the event their losses exceed traditional coverage. One hope is that ECO grows the crop insurance industry by adding coverages as farmers need them. As Korin noted, “We hope that, in the event there’s a bad year, farmers can come back and farm again thanks to the provisions ECO provides.”
Once finalized and packaged, NAU Country brought ECO to the board where they received approval.
Before ECO, Korin said that the NAU Country crop insurance program insured up to 85% of production at the opening rate, leaving farmers with a large deductible. Now, ECO provides coverage from 86% up to 90% or 95%. It’s offered on 31 crops for the 2021 crop year, including corn, soybeans and wheat, among others.
“We’ve created this policy to kick in when it’s needed,” Korin said. “It offers coverage during catastrophic loss years at a higher level than individual coverage that farmers can buy. It also allows farmers to keep their individual coverage at the level they historically have kept it, allowing for more flexibility.”
Long-term goals include adding more crops to the program as early as the 2022 crop season, as well as making the coverage available to more farmers.
“We’re looking to expand this and make it available to more farmers; it starts with education,” Korin added. “We want them to know how this will supplement their annual risk management plans. We’re doing this for the American farmer, so that they can have the protection they need.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with QBE North America. The editorial staff of Risk & Insurance had no role in its preparation.