The true increase to crop insurance rates: Horner
With the rumoured increase of crop insurance the Alberta government, and Minister of Agriculture and Irrigation Nate Horner, immediately took action to address this by hosting a roundtable meeting on March 9.
“The point of this round table today is just to continue clearing the air on some claims that were made... around crop insurance,” said Horner. “This is a very important program for Alberta farmers and we want to ensure that the proper information gets out. The claim that was made... was that crop insurance premiums would be rising by 60 per cent. We’ll just start there, that’s completely inaccurate. Crop insurance premiums will see a rise and it will be due almost entirely to the rise in value of the specific crop, or commodity that they are growing. A year-over-year change from last year. We’ve seen crop insurance go through a lot over the last two years, the program has really changed dramatically. It’s paid out $4.1 billion combined over the last two years. About $2.8 (billion) the year previous, and we look like we’re about $1.3 billion for payout last year.”
Horner then went into detail about some of the things that lead to a higher payout for this insurance which, in turn, would naturally cause it to increase.
“A combination of things. We all know about the drought in 2021, and that was basically a one in 80 year event for ASFC (Agriculture Financial Services Corporation) and lead to indemnity payments like we’ve never seen before. Last year, although it was above the 10 year and five your average for yield across the province we still had some specific difficulties. We had some high payouts through hail claim throughout central Alberta, and with the heightened value of crops the payouts were significant. That was a major driver in the $1.3 billion and also the cool, drier spring, and some other issues around canola probably lead to a different than expected canola yield especially in certain parts of the province. We still have some areas of the province like where I’m from closer to home (Drumheller-Stettler) that still experienced a fairly significant drought last year. Those were kind of the three competing factors that lead to... higher than expected payout last year.” Following the explanation Horner did confirm that the insurance rate is increasing, but not by the same amount that was rumoured. “The insurance rates are increasing,” said Horner. “Our budgeted expected average is about 22 per cent, and that will look a little different, depending on where you’re at, and what you’re growing but that’s an estimated average and nothing like the 60 we heard.”
Horner also provided a breakdown of exactly how the crop insurance receives its revenue, and how the majority of it is funded by the provincial and federal governments.
“Your insurance premiums increase at the same rate as your coverage... largely. The fund has been greatly depleted over the last two years,” said Horner. “There is a small growth factor within the fund, but beyond that you’re paying for your coverage. The 12 and 17 per cent that you will see, will be completely reflected in your coverage on the other side of the insurance calculation. I would say, as a producer, the one thing you can control is having the insurance to cover the terrible years when everything else is out of your control. As much as it’s going up, it’s a nonprofit insurance program. They look at a 25-year lens so they can control increases in premium rates. I would just say there really is no alternative, and I would remind everyone that this program is 60 per cent subsidized by two levels of government so the producers are only paying for 40 per cent.”
Ian Croft, Local Journalism Initiative Reporter, The Taber Times