Comments on: Managing Risk With Revenue Insurance http://www.cropinsurers.com/blog/2007/02/08/managing-risk-with-revenue-insurance/ The American Association of Crop Insurers Wed, 08 Sep 2010 12:57:01 +0000 http://wordpress.org/?v=2.7 hourly 1 By: ESS http://www.cropinsurers.com/blog/2007/02/08/managing-risk-with-revenue-insurance/comment-page-1/#comment-275 ESS Fri, 16 Mar 2007 04:16:01 +0000 http://www.cropinsurers.com/blog/2007/02/08/managing-risk-with-revenue-insurance/#comment-275 RA without the Harvest Price Option should not be an option. Seems like every time we have a short crop/high harvest price you hear reports of farmers wanting to sue their agent for not explaining it properly after the farmer had a loss and did not collect. It would be quite foolish to consider this as appropriate coverage when aggressively forward contracting grain. The GRIP policy is basically a gamble on the county revenue. A lottery ticket that can be purchased by those who happen to grow insurable crops within the borders of a GRIP insurable county. Some counties are better "bets" than others. Many farmers will be overpaid, and some will be underpaid for a loss. This results in a highly inefficient and expensive (not to mention unfair) means of dispersing disaster aid. The mentality of a producer purchasing this type of coverage is that he/she hopes for a county revenue loss and a personal non-loss situation. This could result in a windfall for that producer. The risk of course is that you could lose it all if you are in an area of the county that just happens to suffer a loss due to a somewhat localized peril. Long story short, the APH-based plans are the best value all things considered, and are actually insurance. True insurance products are not designed to give a windfall, but to recoup financially from a loss. If the APH-based products are over-priced as some have suggested, maybe the subsidy should be raised, premiums be lowered and participation increased with the promise of no other safety net. RA without the Harvest Price Option should not be an option. Seems like every time we have a short crop/high harvest price you hear reports of farmers wanting to sue their agent for not explaining it properly after the farmer had a loss and did not collect. It would be quite foolish to consider this as appropriate coverage when aggressively forward contracting grain.

The GRIP policy is basically a gamble on the county revenue. A lottery ticket that can be purchased by those who happen to grow insurable crops within the borders of a GRIP insurable county. Some counties are better “bets” than others. Many farmers will be overpaid, and some will be underpaid for a loss. This results in a highly inefficient and expensive (not to mention unfair) means of dispersing disaster aid. The mentality of a producer purchasing this type of coverage is that he/she hopes for a county revenue loss and a personal non-loss situation. This could result in a windfall for that producer. The risk of course is that you could lose it all if you are in an area of the county that just happens to suffer a loss due to a somewhat localized peril.

Long story short, the APH-based plans are the best value all things considered, and are actually insurance. True insurance products are not designed to give a windfall, but to recoup financially from a loss. If the APH-based products are over-priced as some have suggested, maybe the subsidy should be raised, premiums be lowered and participation increased with the promise of no other safety net.

]]> By: Marcel Backman http://www.cropinsurers.com/blog/2007/02/08/managing-risk-with-revenue-insurance/comment-page-1/#comment-103 Marcel Backman Thu, 01 Mar 2007 17:10:29 +0000 http://www.cropinsurers.com/blog/2007/02/08/managing-risk-with-revenue-insurance/#comment-103 THe revenue product, RA & CRC, give farmers the **safety net*** they need. With currect levels , they let each farmer purchase the protection according to their individual needs. The present program is one that insured can understand. ALso APH is another good product that fits a farmers need, if this is what he need. We need crop insurance, as this way the farmer does not have to rely on subsidies. THe revenue product, RA & CRC, give farmers the **safety net*** they need. With currect levels , they let each farmer purchase the protection according to their individual needs. The present program is one that insured can understand. ALso APH is another good product that fits a farmers need, if this is what he need. We need crop insurance, as this way the farmer does not have to rely on subsidies.

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