Some Crops See More Premiums Paid Than Claims

• February 11, 2016
• Paul Neiffer

Crop Insurance continues to come under attack from certain members of Congress.  They will have less ammunition based upon claims for 2015 crops.

Through February 8, 2016, the RMA has paid out total claims of about $5.482 billion.  Total premiums assessed to farmers were about $9.714 billion.  This results in a loss ratio of .56.  Crop insurance over time should have a loss ratio of about 1, therefore, the 2015 crop year was the best loss ratio since the 2010 crop year.  As a comparison, record claims of over $17 billion were made in 2012.  Slightly more than 298 million acres were insured surpassing the old 296 million acre record in 2013.

However, premium subsidies reduce the amount of revenue generated to cover claims.  For 2015, total subsidies were about $6.054 billion or about 62% of total premiums charged.  This results in RMA paying out about $1.8 billion more than they collect.  Opponents of crop insurance have the largest heartburn on these numbers.  And if we go back to 2012, the net number paid for that year exceeded $10 billion.

Now for some individual crop numbers:

• Corn had 78.133 million acres insured.  Premiums charged of $3.62 billion, subsidy of $2.24 for net premiums collected of $1.38 and total claims of $1.5 billion.
• Soybeans had 74.294 million acres insured.  Premiums charged of $2.1 billion, subsidy of $1.3 billion for net premiums collected of $800 million and total claims of $.91 billion.
• Wheat had 46.675 million acres insured.  Premiums charged of $1.28 billion, subsidy of $.81 billion for net premiums collected of $470 million and total claims of $1.18 billion.

Sorghum was the only major crop that collected more net premiums ($89 million) which was more than the claims ($69 million).  All other major crop had claims greater than net premiums.

The worst crop was rice with total net premiums collected of $28 million and total claims of $179 million.

As crop prices go down, the amount of total claims paid should decrease, however, the actual losses paid will be based upon a combination of yield and price.  2015 crop year had record years, therefore, the loss ratio was low.  We shall see what 2016 brings.

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