The 2012 drought is nearing historic proportions. It shows no signs of giving in any time soon. Besides sizing up level of crop damage, farmers are beginning to wonder if crop insurers will have enough money to meet crop insurance policy commitments.
On Wednesday crop insurers reassured farmers that companies will have the money necessary to quickly pay out claims in 2012, even amid record payouts last year.
For every dollar of premium that insurance companies write, they have a regulatory requirement to have the private financial backing to cover catastrophic losses. Each year, the Federal Crop Insurance Corporation reviews and approves every company's plan of operations to ensure that adequate capital is available, explains Tom Zacharias, president of National Crop Insurance Services (NCIS), the industry's trade association.
"We've always been there for our farmer customers when they've faced tough times in the past and we'll continue to be there," he says.
Last year was marked by widespread weather-related loss and a record $11 billion in indemnity payments. It should serve as a good model for what farmers can expect this year.
Claims typically paid in 30 days
In 2011, most payments to farmers on the policies they purchased were processed within 30 days of claims being finalized. Such efficiency required a highly trained and skilled force of agents and claims adjusters, Zacharias pointed out.
About 5,000 certified crop insurance adjusters in the country are already visiting farms and assessing damage. More than 2,000 of these adjusters are expected to attend NCIS sponsored training sessions this summer where part of the focus will be on this year's droughts.
Level of loss and indemnities hard to measure
Although indemnity payments on the 2012 crop are already being made, NCIS is unable to predict the extent of likely damages this year because reliable information about the number of policies sold in 2012 and the acres covered by those policies will not be available until mid-August. Final indemnity estimates will take even longer to filter in.
In the meantime, Zacharias offered advice for farmers who are facing weather disaster. If producers think they have a loss on an insured crop, they must:
* Notify their crop insurance agent within 72 hours of the initial discovery of damage;
* Continue to care for the crop and protect it against further damage, if possible; and,
* Obtain consent from the insurance company prior to destroying any of the insured crop.
"Crop insurance is working well, and it will prove to be instrumental to agriculture's ability to rebound this year," Zacharias stresses. "As Congress debates a new Farm Bill and as the administration considers future changes, we hope they will see our impressive track record and do no harm to crop insurance."
Keep up on the drought
Farm Progress is pooling all the coverage of the drought from across the country into a single place - www.DatelineDrought.com - where you can see a daily video from Max Armstrong, Farm Progress director of broadcast, and Farm Futures Senior Editor Bryce Knorr, along with national, local and regional coverage of the ongoing drought across the heart of the country.