The USDA’s Risk Management Agency (RMA) has announced it will continue to update crop insurance premiums for corn, soybeans, grain sorghum, spring wheat, rice and cotton. Revised rates for corn and soybeans were offered in most counties in 2012. Revised rates for grain sorghum, spring wheat, rice and cotton will be available in 2013.
On Nov. 28, 2011 RMA announced it would update crop insurance premiums based on findings of an independent study and peer review process. The study is part of RMA's ongoing effort to improve the actuarial soundness of premium rates for crop insurance. In general, the study recommended that RMA give more weight to recent years, rather than the current approach of giving equal weight to all years back to 1975, and will help to provide greater predictability for producers and providers.
RMA is required by law to set actuarially sound premium rates in a timely manner for the Federal crop insurance program. RMA conducts periodic reviews of its rates and methodology. These periodic reviews assure that the Federal crop insurance program does not place an unnecessary financial burden on growers or on the American taxpayer through unsound premium rates. Last year premium rate revisions on corn and soybeans resulted in overall decreases in premium collected through much of the country.
"This effort assures that appropriate and fair costs are charged for crop insurance," says RMA Administrator William J. Murphy. The revised premium rates for 2012 and 2013 incorporate a number of improvements as a normal course of business. Examples include:
- Integration of weather data into the premium rating process, so that losses from rare weather events receive an appropriate weight in the overall experience used to set rates.
- Refinement of premium loads for prevented planting and replant payments. Previously, these loads were determined at a state or regional level. Loads are now to be determined based on weather districts within each state, reducing the degree that excess losses in one part of the state unduly influences premium rates in another part of the state.
- Placement of more weight on loss experience from recent years, which better reflects today's agronomics and crop insurance program.
Consistent with updates announced in 2011, RMA will continue to phase in the new rates so as to limit year-to-year premium changes and potential increases due to losses experienced in 2012 as a result of drought, ensuring greater stability of premiums and more predictable rates.
RMA continues to review premium rates to provide the best rates that most accurately reflect the risk of growing a crop in an area and provide the most affordable crop insurance possible to our nation's farmers. For more information, please visit the RMA website.