Crop Insurance Premium Changes

January 9, 2013

By: Ed Clark, Top Producer Business and Issues Editor

Crop insurance premiums might decline for many

Does the 2012 drought mean sky-high crop insurance premiums for 2013? Absolutely not, says William Murphy, administrator of USDA’s Risk Management Agency (RMA).

Crop insurance premiums for producers in many states will decline for 2013, assuming coverage levels similar to 2012, Murphy says.

"Soybean premiums will
decline in almost all states
with the exception of North
Dakota and South Dakota."

For corn, grain sorghum and cotton crops, there will be relatively little net premium change at the national level because areas with premium rate increases will generally be offset by decreases in other areas. For rice and soybeans, however, there will be an overall decrease of about 8% and 6%, respectively.

In calculating premiums (see maps below and on next page), RMA calculated how its new rates would have affected 2012 actual premiums paid.

So the premiums shown will be what farmers pay next year if they don’t change their coverage levels or make other crop insurance program changes.

Average Adjustments. In the heart of corn country, premiums will decline for 2013—again, all things being equal. Looking at selected states, RMA’s estimated premium will decline by 6% in Iowa and Nebraska; 5% in Wisconsin; 4% in Illinois and Michigan; and 3% in Minnesota and Indiana. Premiums will tumble by double digits in states such as Idaho, Montana, California, New Mexico and Arizona.

Corn rates will increase in other states, however: a 15% spike in South Dakota; 11% in North Dakota; 4% in Kansas; and 1% in Missouri and Ohio.

Murphy points out that these are just state averages, and rates and premiums play out differently at the county level. Texas, for instance, will see no change in corn crop insurance premiums overall, but in some counties, premiums will be 10% to 12% lower and in others 10% to 12% higher, based on loss history. That’s true of other states, too.

Why are rates and premiums going up so much in North Dakota and South Dakota? "Prevented planting payments during the last five to seven years," Murphy says. Nationally, 70% of prevented planting payments have been made in those two states.

Soybean premiums will decline in almost all states with the exception of North Dakota and South Dakota. In those two states, premiums will increase 2%.