Hursh: Your crop insurance bill has arrived

As I combined a thin, low-yielding field of mustard, a call came from my spouse/office manager. Amongst her information to pass along was the arrival of the annual bill from Saskatchewan Crop Insurance Corporation.

“How much does SCIC want?” I asked.

“It’s pretty big,” she said, quoting the amount.

“No, no, that must be the total premium including what the province and feds pay,” I protested.  But no, she had it right. She was quoting our portion of the premium. Ouch.

It shouldn’t have been a surprise. The premiums per acre were all delineated in the spring. However, the total premium amount for the previous year was stuck in my head and I wasn’t prepared for this new total based on higher grain prices and a major change in how premiums are calculated.

I’ve heard from other producers that have also gasped when seeing their premium totals and these aren’t all producers from the areas associated with poor crops in recent years. Many bemoan the system change whereby their 40 or 50 per cent experience discount has been eliminated in favour of a new methodology.

The basic premise of the new system was widely communicated with producers last winter. We were told premiums would reflect each policy holder’s claim history on each individual crop as compared to the overall claim history in their particular risk zone.

Since coverage levels have been much higher in recent years, recent history becomes much more important in the calculation. In my column on this topic back in March, I argued that rather than adding up all the premiums and all the payouts since 1998 on each crop, it may be more reasonable to use a system that averages the loss percentages over the years.

As well, perhaps the risk zones are too large for good analysis. With hailstorms or even droughts, crop yields can be far different from one side of a risk zone to another.

Many producers saw their premiums reduced or stay relatively the same. Others, with a poorer claim history saw increases. SCIC said the increase in premium from the methodology change was capped at $5 an acre this year. Changes beyond $5 were due to other factors like an increase in insured prices and overall premium rates.

For 2024, claim results for 2022 will be included. For 2025, this year’s claim results will become part of the calculation. Where will premiums end up for producers in the dry areas with multiple and consecutive claim years? Will the premium increase from the change in methodology continue to be capped?

Farmers comparing their premiums with friends and neighbours have a lot of questions. On the surface, it can make little sense why one farm has a much different premium on a crop than another farm nearby.

For most, the premium calculation is a black box. There’s little appreciation for how the cost is derived. More transparency would be really helpful.

Each crop insurance customer should have easy access to all their premium calculations. With a better understanding of the methodology, more constructive discussions could take place on possible improvements.

Crop insurance provides far more support than all the other business risk management programs combined. There will always be critics complaining about coverage levels and premium cost. However, in the months ahead, hopefully SCIC will seek feedback from fully informed producers as it readies the program offering for 2023. You can bet that Alberta and Manitoba are watching the Saskatchewan experience closely.

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