Insurance companies are slowly moving in to fill a void created by governments backing away from farm income support programs.
However, a senior farm insurance provider says they’re not in a rush.
Doug Lyall, vice-president of product development for Western Financial Group, said private replacements for government supports are going to be carefully structured so they don’t change as often as government programs.
“We want to make sure that it’s not a short-lived product,” he said.
“You want to make sure your products you bring to the table are going to last and be sustainable over 15, 20, 25, 50 years.”
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Governments have recently re-treated from “ad hoc” disaster payments for the various types of weather and market crises that periodically afflict farmers.
They also slashed the support levels of one central government support program, AgriStability, leaving farmers fuming all winter at farm organizations about the collapse of the safety net.
At the same time, private insurance providers have developed programs to both complement government programs and replace them.
Lyall said the trend will continue and is more likely now that governments are playing a smaller role.
“When the governments are doing the subsidy programs, it’s hard to get enough premium in to pay the claims and still have a margin of profit,” said Lyall. “As the government steps back and insurance companies look at this, there is a capacity to get enough premium to justify it.”
Insurance provider Marsh already offers cost of production insurance, and different types of production insurance have existed for years.
Almost $280 million was paid out to prairie farmers for 21,600 hail claims last year, according to the Canadian Crop Hail Association.
Lyall said farms are now much larger, more sophisticated and invest more per acre in crop production than in previous decades. As a result, many farmers are getting interested in insuring their growing risks.
“Their risk is different,” said Lyall.
“They’re storing millions of dollars of grain in grain bins on one site, when there used to be a bin on each quarter.”
He said the private sector’s bigger role in farm insurance is the result of farmers’ recognition of increased risk, the government’s retreat from its support role and insurance companies’ seeing a bigger opportunity in agriculture
“The industry has had to start to adapt to the new style of farming, the new ways that farmers have to operate, and make sure we’re providing products that adequately cover them with wheat they need in security on a cost effective basis,” he said.
