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Veteran Advisor
Posts: 1,663
Registered: ‎06-30-2010

Re: Sorry

[ Edited ]

Some insurance outfits might bail if cut back too much, others would probably pick up the slack to make it up on volume.  In the past, some insurers have carried their own risk on some of those policies anyway, just to make it possible to have greater profit potential, or loss potential of course.

 

I've heard crop insurance agents say they don't make much off the crop insurance policies, yet have also seen that they live in really nice houses, have nice shops, new pickups, very modern equipment, and continue buying land.  Don't have a problem with any of that, yet we all know they didn't get much of what they have from farming.  Otherwise, there are agents that really don't make much off of crop insurance because they are sub-agents for someone else -- they originate the policy and have their name on the policy as agent, yet there is another agency that does most/all the paperwork and collects most of the agent share of the premiums.

 

Haven't done this recently, maybe 10 years ago, yet I once set up a spreadsheet and put in all my data on acres and yields for previous history for each farm, and did a comparison of different types of policies and levels of crop insurance based on current premiums at the time for each policy type/level.  Whenever I did this, I looked at costs of each type/level policy compared to potential claims for a period of several years.  At that time, what I found, at least for my farm during that time period, was that there were 2 policies that would have actually paid more in claims than what they cost in premiums -- these were the cheapest policy CAT (due only to prevented planting and a wheat freeze-out one year), and the most expensive policy (I forget what it's called, but it's the one that pays based on county yields, and the payoff is/was a factor of 1.5 or 2 times the actual loss).  ALL of the other yield plan and revenue plan types of policies I looked at over time actually were money losers, even with the premium subsidy -- the more I would have spent, the more I would have lost (premiums versus claims, accumulated over that time period).  Of course, that's what makes insurance work, as opposed to just being a hand-out.