It’s supposed to work this way: Farmers finalize all the paperwork for this year’s unprecedented crop loss and get their indemnity check roughly 30 days after that. That is what insurance policies state and what approved crop insurance companies have agreed to.
"Given the number of claims that will occur this year, we will test the system in ways it has not been tested, however," says Keith Coble, ag economist at Mississippi State University. "Companies can process claims much more quickly than in the past, but we have not had such widespread losses in years."
If a payment is delayed through no fault of the insurance holder, the insurance company has to pay that client interest beginning on the 61st day after the claim has been finalized. It is a strong incentive for quickly making good on claims.
But given the expected record number of claims this year, just when can farmers expect to receive their money?
An insurance company official speaking on condition of anonymity says there could be a five-month window for payments—from October 2012 through February 2013—depending in large part on when claims are finalized.
That sounds worse than it actually is. Corn harvest alone will last about five months this year, depending on where producers are located. That alone will go a long way to help guarantee indemnity checks are made in a timely manner.
Additionally, insurers will not be deluged with all claims within a two-week window, says Kevin Johnson, sales manager at Farmers Mutual Hail Insurance Company of Iowa. His company has customers throughout the Midwest.
Furthermore, many producers do not want to be paid in 2012 for tax reasons, particularly if they sold their 2011 crop this year. The last thing some want is to trigger two years of income within one year. For them, checks in January or even February are acceptable.
"We hope to get everything paid within 30 days of filing," Johnson says. "If farmers have their claims in now, it will be no problem" getting them processed quickly. For producers who don’t get their claims filed until later this month or November, "we will get bogged down," he says. Those might not be completed for a month or more.
Johnson estimates that 75% of his company’s farm customers will have a claim this year. He adds, though, that "we can withstand a year like this year. Every farmer will get paid."
The only remaining issue is timeliness.
"No company can be staffed for a year like this," Johnson says.
One practice his company and others like it are pursuing to meet expected demand is to move adjusters from areas with a small number of claims to areas awash in claims.