The losses from these claims are continuing to grow in the Corn Belt.
After a growing season that has already led to exceptionally high crop insurance losses as a result of droughts, the temperatures in the triple digits are now sending a new wave of claims through the Corn Belt, with record losses being predicted by experts in the industry.
This problem has been made worse by the changes that decreased the premiums of some growers.
It has been estimated that the crop insurance losses will reach almost $15 billion this year. This is a tremendous strain on the coverage which is subsidized by taxpayers. It has also been predicted that there will be a tremendous $25 billion in claims that will be filed across the country as a result of the recent struggles on top of the worst droughts that have been seen in this country in several decades.
For every dollar paid in crop insurance premiums, the losses will likely reach $2.50.
The Risk Management Agency at the U.S. Department of Agriculture made a number of changes to the crop insurance program earlier in 2012 and in late 2011, which will likely make those underwriting losses from the drought even larger.
This is because the changes that were made allowed many growers to pay lower premiums for soybeans and corn in 2012. Moreover, the agency also altered the yields for the crops to reflect an upward trend that has been seen recently. Many in the industry are now looking into the feasibility of those reduced rates in terms of the sustainability of the program.
Though farmers are now paying lower rates, the savings is not significant to each individual policyholder. However, the impact on the program as a whole has been a notable one due to the size of the losses that have been experienced this year.
Much of the changes in the rates for the crop insurance were made based on the assumption that new technology that has been used for growing would reduce the possibility of big losses. For example, it was believed that drought-resistant, genetically modified seeds would be enough to make the difference. However, this was the first year in which they were used and the drought that they faced was far larger than anyone had expected.