The private sector is anxious to take the federal government up on its invitation to become involved in the crop insurance business, says a spokesperson for insurance companies.
Norman Lafreniere, president of the Canadian Association of Mutual Insurance Companies, said last week private insurance companies could deliver crop insurance more efficiently, cut administration costs and expand services available.
It also would allow private companies to tap into a market worth hundreds of millions of dollars to the industry.
But to make it work, federal and provincial governments would have to continue subsidizing the business.
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“We are not saying that we should be just like the U.S. system,” he said in an interview from his Ottawa office. “What we want is to maintain the subsidies the way they are but we would like the government to use the private sector to deliver the crop insurance program and to share in the risk of insuring crops in Canada.”
Lafreniere was reacting to an invitation from federal agriculture minister Lyle Vanclief to the insurance industry that they try to convince provinces to let them into what has been a government monopoly for more than 35 years.
In an Oct. 6 Ottawa speech to the insurance industry lobby group, Vanclief said it is a provincial decision but the federal government would be “very open to new ways of doing business.”
Show how it works
He suggested the industry convince one province to allow a pilot project in which a private company would deliver crop insurance.
He also suggested the private sector could have a role in Ottawa’s re-insurance program, used to protect provincial crop insurance corporations from large losses.
Vanclief’s suggestion quickly drew an uneasy response from Canadian Federation of Agriculture executive secretary Sally Rutherford, who worried about higher premiums, two-tier service and a reduced government commitment.
Lafreniere said premiums would not go up, as long as the two levels of government continued to pump close to $400 million annually into the system and the federal government assumed responsibility for “catastrophic” crop failures.
Beyond that, he said the private sector could provide the services at less cost, getting rid of the crown corporations and convincing more farmers to buy insurance.
He said lower costs could lower premiums. And insurance companies would be able to develop low-premium policies which insure only out-of-pocket production costs.
“Farmers have been asking for that,” he said. “We feel this would increase participation. Right now, the crop insurance has a participation rate of about 50 percent. In the United States, they have a participation rate of up to 80 percent. We would like to see it much higher.”
He said private sector profits would come from an increase in policies sold, rather than through higher premium rates. “The profits would come from higher participation and more efficiency.”
Find willing province
What must be done now is to find a province willing to allow a pilot project. Lafreniere said Ontario, Alberta and British Columbia seem to be the best bets. “They are the most willing to consider private involvement.”
However, because most of the insurance company farm policies are in Ontario, the most likely candidate is that province, he said.
“Hopefully, if it proves itself there, other provinces will take an interest.”
At present, farm insurance is a $650 million business for the private sector, which sells a variety of policies beyond crop insurance to farmers across the country.
“If we got into crop insurance and there was a universal takeup, it would double our business,” he said. “That will not happen but it could be a very important new opportunity.”
