‘More money paid out than received’: Crop insurance companies decreasing market share
Years of drought conditions overwhelming insurance companies.
LUBBOCK, Texas (KCBD) - Crop insurance companies are looking to drop some of their business in Texas because years of drought conditions have resulted in the filing of more claims.
Joe Brown who has owned his crop insurance agency, Joe Brown Crop Insurance, for 18 years said insurance companies have done this before but not to this level. He said companies can’t keep up because there have been too many claims filed from weather conditions.
“Texas is historically well over a 100% loss ratio, more money paid out than received in,” Brown said. “It’s been recently as much 200 to 250% loss ratios.”
So, to keep going Brown said a few insurance companies are having to drop some contracts in Texas.
“Some of the biggest companies in this area that have the most market share are wanting to correctly size their book of business back, so that they’re no longer as exposed,” Brown said.
Brown says these companies can’t just increase rates to stay afloat.
“Those rates are not set by the companies,” Brown said. “Those rates are set by a national body called RMA, Risk Management Agency, which is a part of the government that manages the crop insurance program.”
Then, the companies administer that policy. That involves taxpayers paying about 60% of crop insurance premiums and farmers paying 40%. Brown says compensation for the companies has been cut in half.
“Yet the companies have had continuing increased losses and exposure with roughly half percentage wise of the former compensation, very difficult to make a return,” Brown said.
Brown says this will have an impact on agriculture in Texas that includes the agents.
“That agent has now got to go look for a company to place a farmer with, and if that becomes terribly difficult then the farmer now has to make the decision, ‘Can I continue to work with my agent,’” Brown said.
He said don’t worry. Producers will find an insurer because as these companies decrease business, others are growing business.
“There will always be a place for a farmer to find insurance,” Brown said.
Brown tells KCBD the difficult part might be the change itself. A farmer may have dealt with a specific company and agent for years, and now might have to go somewhere else.
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