To Don
Fraley, president of International Agricultural Insurance, Inc., and a longtime leader and member of the crop insurance sector, the trends are crystal clear.Fraley recently penned an editorial for "Crop Insurance
Today," a publication of National Crop Insurance Services. In it, he pointed out that there are about 1.91 million farmers in the United States today compared with 5.75 million a century ago, a decrease of
67%. And in 1981 there were 44 companies contracting with the Federal Crop Insurance Corporation for reinsurance under the Standard Reinsurance Agreement. Today, 18 companies maintain this agreement, a
decrease of almost 70%.
Fewer farmers to insure, an aging farm population, and more acres taken out of production each year spells a declining market base for crop insurance companies, which must also balance
pressures to offer the best products at the lowest premium rates possible for farmers, cover losses, manage company operating expenses, build revenue reserves and meet shareholder profit expectations.
It means business as usual can't continue.
In the new millennium, Fraley says he sees companies expanding their market base by offering completely new insurance products to a greatly expanded client base. Some
possible products include:
• Income protection based on a farmer's average income — This would involve a combination of average production over a period of years combined with an average commodity price
over the same period of time.
• Insurance for farm product suppliers — This might include seed (which because of biotechnology, may offer the most interesting potential) as well as fertilizer, chemical
and equipment outlets. This could include transportation and storage coverage, product liability and guarantee of performance.
• Insurance for grain processes — These policies could be designed to
guarantee quantity and quality of grain necessary for operation of elevators, mills and seed companies.
• Farmers outside of the U.S.
— Fraley points out that some U.S. companies have for years already written crop-hail insurance in Canada, and that there exists a tremendous opportunity to become involved in a multi-peril crop insurance program in many Canadian provinces with the Canadian government. South America also offers opportunity. "Several countries here are now major world grain producers. They utilize modern farm machinery and cultural practices similar to those used in the U.S.," Fraley writes. "The countries have stable governments favorable to agriculture and have favorable economic environments."
Regardless of your thoughts about crop insurance, Fraley has the right idea. He is challenging his industry that to survive, it must change. All sectors involved with agriculture must do the same:
Recognize the realities and trends, and adopt the best options to manage and even capitalize on them. To no one in agriculture is this soul-searching and action-taking more important than farmers, and there are no
better ways to accomplish this than through your involvement and support in your growers association.
