All signs point to lower crop insurance premiums for farmers in the U.S. – especially in the nation’s Corn Belt – according to an Iowa Ag Review report in its Fall 2009 issue. Through analyzing trends in corn crop drought tolerance in its “Drought Tolerance and Risk in the U.S. Crop Insurance Program” report, it looks like the current risk to American crops is low enough to no longer justify current crop insurance premiums.

Corn and Soybean Crop Losses Ratios Have Been Declining

Iowa’s report shows a significant difference between crop losses in the 1990s compared to the first decade of the 21^st Century.  According to the report:

“…the overall loss ratio for the U.S. crop insurance program has indeed been declining. The average loss ratio from 1989 to 1999 was 1.12. The average from 2000 to 2008 has been 0.88. And there has not been a loss ratio above 1.0 since 2003. However, a declining loss ratio, in and of itself, is not proof that crop risk has been reduced. For example, the decline could be due to good growing-season weather. There have not been widespread losses in the Corn Belt due to drought since 1988, and Corn Belt states account for more than half of the total liability in the program. Before we can conclude that risk has been reduced, we need to account for whether the decline in loss ratios could have been caused by a string of better-than-average growing seasons that could change in the future.”

Corn Crop Drought Tolerance Is Increasing Over Time, Too

The Iowa Ag Review report also found that data suggests that crops like corn and soybean have become more drought resistance, compared to how crops dealt with similar conditions over the past few decades.

“…the data seem to support the idea that corn has become more drought-tolerant over time. The evidence for soybeans is a bit mixed. Percentage yield loss due to drought is lower in 2000–2008 than in 1980–1989 for all droughts except for the most severe category, while there is no clear pattern for bushel-per-acre loss. But for both corn and soybeans, the evidence seems strong that the percentage of yield lost due to drought has declined over time.

For corn, a return of a 1988 drought would reduce yields by 31 percent in 2008, which is far below the 45 percent losses from the same drought in 1988. This is a reduction in yield risk from drought of 31 percent. For soybeans, there has been less of an increase in drought tolerance than for corn. But for a 1988-style drought, estimated losses have been reduced from 28 percent of drought-free expected yields to 23 percent—a reduction in drought risk of about 18 percent.”

Crop Insurance Premiums Are Based On Past Risk, So Reduced Risk Demands Reduced Premiums

In simple terms, U.S. crop insurance rates are determined by the history of risk associated with that particular crop. Since that risk has been demonstrated as declining from the 1980’s and 1990’s compared with the 2000’s, it is reasonable to assume crop insurance premiums would decline, as well.

“The maintained hypothesis that underpins all premium rates for the U.S. crop insurance data of a constant percentage yield risk over time is not supported by the data. Both corn and soybean yields in the Corn Belt are more tolerant of drought today than they were in the past. Because drought is such an important source of yield risk, this finding implies that Corn Belt crop insurance premiums are too high.”

And the impact of lower premiums would be incredibly helpful to farmers saddled with high insurance premiums where most pay in much more than they draw out.

From the report:

“The impact of lower premiums on farmers is straightforward: if premiums were to drop by 40 percent, then the premium that farmers would have to pay for the same level of coverage would fall by 40 percent. Consequently, farmers would greatly benefit if increased drought tolerance were accounted for in crop insurance. The amount that crop insurance companies receive as an expense reimbursement would also drop by the same percentage because expense reimbursements are calculated as a proportion of premiums. This drop in expense reimbursement could be lower if farmers responded to a premium decrease by buying more expensive coverage.”

Live Asset Insurance Offers Options That Federal Crop Insurance Is Unable To

Live Asset Insurance provides growers insurance that covers fewer crops than the government programs at a lower cost. Live Asset provides coverage as a private company – unsubsidized by the federal government – against wind, freeze, hail, fire and flood, among others.

For more information on how our policy differs than what data suggests is an unnecessarily bloated government crop insurance program, check out our crop insurance options.

U.S. crop insurance companies, especially those subsidized mainly by tax dollars, are doing quite well from their perspective—revenue is skyrocketing. 

However, the Risk Management Agency of the USDA (United States Department of Agriculture) points to excessive gains on the part of those companies that rely greatly on taxpayers for their revenue, proportions of it that would otherwise be paid by actual customers in those companies unsupported by the government.  In essence, the federal crop insurance industry is getting extremely rich at the expense of people whose relationship to it is at best indirect.

A Crop Insurance Program Behaving Badly

This is not to say that tax dollars shouldn’t be spent to help some of the businesses that help the farmers. After all, each and every one of us depends on farmers for the food in our pantries.  However, when an organization is so reliant upon federal subsidies, one has to wonder what’s going on when they begin to report disproportionate increases in revenue that are, as implied, not accounted for by inflation or other legit factors.

Iowa State University’s Center for Agricultural and Rural Development discussed the RMA’s criticisms of the federal crop insurance program in its Iowa Ag Review (Fall 2009, Vol. 15 No. 4) – Examining the Health of the U.S. Crop Insurance Industry. 

IAR

According to the Iowa Ag Review analysis, the conclusion the RMA reached is equivalent to the one we all would reach if we looked at the reports surrounding federal crop insurance’s finances:  something strange is going on.  As is often the case when large amounts of money passes through a large amount of hands, finding out who did what and why is not the easiest of tasks.

“Insurance companies obtain revenue from premiums paid by their customers and obtain additional revenue from invested capital. This revenue must cover claims paid out, the cost of adjusting claims, any cost of reinsurance, as well as other overhead costs such as salaries. Profits are positive when total revenue exceeds total costs. The big difference between the crop insurance industry and unsubsidized insurance industries is that about 80 percent of the premium revenue that would be paid by customers is actually paid by taxpayers. This 80 percent number consists of the 60 percent of premiums that are paid by taxpayers and the 20 percent expense reimbursement. In addition, taxpayers provide crop insurance companies subsidized reinsurance in exchange for the requirement that the companies must sell insurance to all farmers in areas in which they do business.

That such a large portion of premium is paid by taxpayers heightens the importance of determining whether the RMA report of a 72 percent excessive rate of return does, in fact, accurately describe the current situation.”

Why Live Asset Insurance Is Not Like Federal Crop Insurance

In the interest of fairness, Live Asset Insurance does not cover row crops like corn, wheat or soybeans. The one portion of the agriculture market we do cover is nurseries. That being said, our policies and coverage function much differently and more efficiently than federal crop insurance models.

Since Live Asset Insurance relies exclusively upon individuals for revenue, this kind of scenario is extremely unlikely to occur, and it actually highlights the advantage that we bring. 

An increased price for your policy means a more encompassing policy—a rule that was apparently violated in the case of those companies receiving tax dollars. The quality of the policies sold remained the same while their prices soared.  If any merchant, tax funded or not, just suddenly demanded a heightened price/budget for a service or product without any corresponding gain on your end, you would rightly wonder about the legitimacy of the exchange. 

Live Asset Insurance provides simple, easy, effective crop insurance coverage where federally subsidized policies fall short.  This critical assessment of federal crop insurance programs is more reason to consider Live Asset and explore the difference between federal coverage and our crop insurance.

Wine grape vineyards in California had a tough 2008 crop season. In some areas of California, some growers saw 25 percent drops in their wine grape yield. Even without the 2008 frosts and other weather challenges, growing wine grapes is an expensive venture that isn’t all that easy.

Multiple frosts cost north coast California wine grape vineyards nearly $150 million

People with intimate knowledge of the California vineyard industry have called the 2008 spring frosts “historic.” According to press reports, most of the damage stemmed from one chilly April night that frosted hillside vines that normally escape damage. Most growers, though, took lessons from last year and are expecting a comeback for 2009.

Live Asset wine vineyard insurance offers more coverage for California wine grape vineyards and more

What some people growing wine grapes don’t know is that their existing wine vineyard insurance has some serious and potentially costly deficiencies.

Live Asset Insurance offers insurance for vineyards like no other

There is no coverage for the actual vines anywhere else in the country except with Live Asset Insurance. Vineyard crop insurance only covers the grapes and raisins after they reach a certain size and production tonnage. As a result, there are thousands of start-up wine grape vineyards that have no insurance at all for their plant material. That means for at least 5 years they are holding their breath and so is the lender.

Take a look at what Live Asset Insurance can do to protect wine grape vineyards in California and elsewhere.

Tree farm damage from high winds. Federal crop insurance does not cover standing timber.

David Teed, Managing Director of Live Asset Insurance, describes the ins and outs of crop insurance services 

Federal crop insurance is not as cut-and-dried as you might think. The fact is, other protection is available for crop insurance brokers to offer their clients to fill in the gaps where government crop insurance services fall short. David Teed, Managing Director of Live Asset Insurance, answers a half-dozen questions on the nitty-gritty of federal and private crop insurance.

Q: What is the relationship between Live Asset insurance and federal crop insurance subsidized by the government? 

David Teed: Live Asset was created to fill coverage gaps left by the federal crop insurance and to compete directly as a private company rather than a subsidized one. Congress mandates they not compete when a private enterprise offers comparable coverage. The government program is used as a means to protect against catastrophic loss, but most buyers are self funding the majority of the loss and simply enriching the brokers selling them the policy. Taxpayers and the growers are footing the bill for coverage that rarely gets used, leaving everyone but the brokers upset. 

Our policy is a named perils death and destruction policy, meaning we only cover those perils named in the policy that kill or destroy the plant to the point it will likely die in the near future. National crop insurance offers “all risk” coverage which means they cover everything except that which is excluded. The exclusions make our crop insurance services comparable in many ways at the end of the day.  

Q: What is the practical benefit of obtaining the coverage provided by Live Asset coverage? What is unique about the crop insurance services Live Assets offers? 

DT: The practical benefit is that now growers can eliminate the huge gaps in coverage to protect their bottom lines and find coverage for plants that the federal crop insurance program has excluded. Growers whom are patriots and believe in self reliance will embrace our policy as a means of doing their part to reduce the national debt! There is no other source in the country currently offering our coverage, making us unique and exclusive as a private crop insurance program. 

Q: Are there some plants that federal crop insurance doesn’t cover that Live Asset insurance does?  

DT: Crop Insurance excludes vines and Christmas trees to name only two items, but these are major items for us. National crop insurance excludes vines and we are the only source in the country that insures the vines. Our policy is also unique because we can insure up to $250 dollars per vine which allows the grower to replace their destroyed vines with new roots/vines, but receive full replacement value payment for the loss. 

How can the government exclude Christmas trees?  They do not cover standing timber. They also do not cover containerized trees over a certain gallon size…300 gallons. But we will. We have no such limitations or conditions on garden centers that have a grow field where they derive over 50 percent of their income from the retail center; the government will not insure their operations. There is no federal crop insurance coverage for trees growing on residential or commercial properties not held for sale to the public – like a golf course or cemetery or zoo. They require clients to perform tasks for coverage to apply like lay down plants before a storm and cover them with pine straw, we have no such limitations. 

We are only writing in 19 states at this point, but we hope to pick up a lot more when the government starts to back away from competing against us as a private carrier. There are other issues I am learning everyday causing me to realize that the government program is not the answer for many agricultural citizens.

 Q:  If someone has both federal crop insurance and Live Asset insurance, how do those two areas of coverage interact should a claim be filed? 

DT: If someone has both policies, it depends on if the government is excluding the coverage, like on vines! Then there is no coordination, but if they are insuring only catastrophic coverage under the government policy then ours is primary and the government is excess. Typically we will know what the coverage is before hand and we will insure the total insured value (TIV), but only insure the primary portion not covered by the national crop insurance policy. 

So, if someone had 10 million trees held for sale in a nursery and they had a policy with the government covering 55 percent, we would insure the 10 million but discount the price by a factor using excess coverage discounts because we will not pay the full 10 million (as 5.5 million is covered by the govt). Our policy would be primary on the first 4.5 million replacing the growers self funded exposure. 

Q:  How about cost? Federal crop insurance is subsidized by the government. Wouldn’t other coverage be more expensive? 

DT:  Our policy is about 50 percent less than the government policy, apples-to-apples. But you are right that no private enterprise can compete with a taxpayer based subsidized program that does not have to turn a profit! We offer primary coverage for owners when the government makes them pay first dollar before they kick in a penny. 

Q: In your opinion, what are the main areas of misunderstanding or confusion when it comes to Live Asset insurance and crop insurance brokers? Why should crop insurance brokers offer Live Asset insurance to their clients? 

DT:  Crop brokers who care about their client’s exposure will tell you that a federal crop insurance policy is not worth the paper it is printed on, but they do not want to reduce their income of 17 percent commission from the government policy and take about half that amount from us. This is short sighted because the client can come to us directly and they will lose it anyway. Or another broker who is targeting their client can offer our protection as a solution and they can lose it to another broker. Or they can do the right thing and reduce their income from the taxpayers on a policy that they do not believe in and sell our policy as a blend with the federal crop insurance program. We want to reduce the nursery tax burden by billions.

This is exciting news for farm managers and the crop brokers who insure them!

The only overall complaint we hear at Live Asset Insurance from prospective clients and their crop brokers is that our minimum premium is just too high for them to afford. There are thousands of mom and pop farms that have live asset exposures, but can’t afford the $5,000 entry fee. We heard you and we have been trying to find a way to get around this issue.

Bundle Your Assets, Protect your Crop Exposures

We hope to announce shortly that smaller live asset exposures can be written on a single “bundled” property policy for the owner, operator, manager or broker for a smaller sized or niche farms.  Our legal department is finalizing the 19 state offerings.

Qualifying farm managers must control the farm operations and be contractually responsible for the protection of the plant material. We will require management firms to enforce our inspection standard of care so quality random sampling can be done to keep our inspection costs low.

This will apply to all live asset crop and farm managers:

• Vineyard
• Nursery
• Greenhouse
• Orchards
• Tree Groves
• Golf Course
• Botanical Gardens
• other growing plant material exposures.

We expect to officially announce this in the next few weeks, so stay tuned

Rough Notes is a great trade communication for the insurance industry, so having this coverage is a wonderful way for us here at Live Asset Insurance to be able to get the word out. With such a new, but necessary and worthwile,  insurance program the biggest challange has been getting the people who would require such vital natural disaster insurance coverage for their nurseries, tree farms, and landscaping especially in the wake of all these distrubing climate changes.

This article should prove to be an excellent resource allowing us to explain what we do and the value of Live Asset Insurance at a glance. It’s worth a read especially if anyone has the slightest bit of confusion over what we do and how we do it. Just follow the link below to access the whole article:

Protecting Clients’ Live Assets -New Insurance Program Covers the Substantial Values of Trees, Shrubs and Plants

Thanks to Ed and the folks at Rough Notes!!

While reading the June 18th New York Times I came across an article that discussed the tree damage in Central Park during a mid-June storm.New York Times In total, the park lost 33 trees, including a handful of trees that were three to four feet in diameter. There was a considerable amount of maple trees damaged, as well. At the same time, I saw dozens of trees down in my town of Stamford, CT. I even had to change driving routes three times one night due to road blockades as a result of fallen trees! However, the extreme weather damage in the tri-state region paled by comparison to nationwide events.

Flooding in the Midwest dominated the news; displaced thousands, and will end up costing billions of dollars. According to a study done at Ball State University the total crop damage could reach $2.7 billion. The following week, it was the ballooned Mississippi River that we saw all over the news. On June 19th CNN.com reported that eleven levees, both natural levees and man-made, on the Mississippi have been breached around St. Louis. The number of overflowed levees was up to twenty in Iowa and Missouri alone. CNN.com The damage caused by the flooding of the Mississippi had already ruined 25,000 acres of crop in Adams County, Illinois, while flooding in Oakville, Iowa, covered over 20 square miles of crop fields.

While the trees lost in Central Park were miniscule in dollar value to the crops lost in the Midwest, each loss could have been remedied through Live Asset Insurance. For example, the trees in Central Park could have been insured and replaced with replacement trees of the same size and species. Crops lost from flooding in the Midwest could have been replaced as long as they were inventories insured under our live asset policy.

The trees in Central Park are gone and farmers in the Midwest are left to rely on their Federal Crop Insurance policy. However, they are going to suffer greatly due to its high deductibles and nominal protection. With Live Asset Insurance, the covered live asset would be subject to replacement from the tornadoes and flooding. The trees in Central Park could be replaced, along with the covered crops in the Midwest. Unfortunately, they are lost forever.

While Live Asset Insurance is not yet available nationwide, these natural disasters show how a catastrophic loss can effect the lives of so many. Don’t get caught in Mother Nature’s crossfire! Protect your important live assets.

Hurricane season, officially from June 1st to November 30th, happens to coincide perfectly with the growing season.

The American Nursery and Landscape Association, which represents growers, greenhouses and landscapers nationally, is collectively growing more anxious about significant weather events. Many of their members have suffered dramatically from recent freeze, wind and hail losses. Now hurricanes loom on the horizon.

With almost certain landfall potential for these predicted storms, there will be significant losses for hundreds of thousands of residents in coastal areas. For families that earn their living from the land; such as farms, nurseries, greenhouse, golf courses, vineyards, orchards, etc, these whirlwinds of disaster can do more than damage homes. Even a weaker hurricane has the potential to economically destroy the very foundation from which they have built their lives.

Live Asset Insurance can’t stop the wind, but it can help you rebuild after a loss happens. Enthusiastically endorsed by the ANLA, our policy provides important coverage for wind, flood, freeze, fire, hail, and other named perils associated with these nasty weather events. Our policy could be just the “hedge” you and your family need to beat the odds.

Our “natural disaster” insurance policy, called Live Asset Insurance, will respond when Hurricanes and Mother Nature destroys “live asset” inventory; field grown, containerized or greenhouse grown plant material.

If you are a golf course with signature trees, this policy is the only one of its kind in the nation that will respond with replacing your trees with the same like, kind and quality. We also include debris removal.

The beauty of the policy is that it can be used as a stand alone policy; covering all trees, shrubs, vines, and flowers, or, as a supplemental policy; used to fill the coverage gaps or vacancies in the government crop insurance policy. This makes us uniquely positioned to help protect the Green Industry in ways never commercially available before from a private insurance source.

If someone has purchased a “Catastrophic” Crop Insurance Policy, it only covers approximately 25% of the total exposure.

Live Asset Insurance can provide 75% coverage to eliminate that portion that is self insured. The same scenario applies for those who have bought the governments increased or “buy up” limits. The government’s crop insurance policy is a subsidized, taxpayer supported program and 100% coverage is unavailable. The most anyone can purchase is approximately 75% coverage. We can provide coverage for the remaining 25% for near complete coverage.

This 1/4 coverage gap may not seem like a big deal, but when you are talking about 10 million or more at risk from a storm, and a quarter of that will have to come directly out of the owner’s pocket before the other policy even responds, then that gap becomes a 2.5 million dollar deal breaker. Even for a much smaller investment, a great portion of people cannot fork over the first 75% of any loss and then wait to get the other 25% back. Not when they have no way of earning income while they dig out of storm rubble and floods, it’s just too much.

No one can stop a hurricane or the damage they bring, but together we can minimize the long term effects of their losses and try to make it right again.

Almost 100 years ago, at the beginning of the Industrial Revolution, one of the countries’s first true risk management firms offered information and expertise about risk and how to avoid it, minimize it or transfer it. It is that same firm that is again leading the way with the exciting and revolutionary Live Asset Insurance program for the Green Revolution of today. This progressive and forward thinking behavior is why The JLS Group, Inc. is the proud parent company of Live Asset aiming to provide solutions for another 100 years.

We do best when we work with what nature intended us to be. Farmers and growers stick to their roots, and wait for things to grow organically, relying on nature and the elements as they have for centuries. Hurricanes have no choice, but to do what they were created to do and they are natural disasters, made to destroy. The hurricanes will come this season and the two will clash, but JLS and Live Assets are also doing what comes naturally to us as well: We have created the perfect risk management solution again.

So let the winds and rains of the hurricanes come; Live Asset Insurance will allow you to rest easier.

The cost for the “catastrophic” insurance policy from the government is $100 a year. The majority of people buy this policy because it is “virtually free” insurance, until you have a claim.

Let’s assume a “grower” has 10 million dollars of nursery stock at risk. On a total loss he or she would be uninsured for the first 5 million. How many can absorb a 5 million deductible? Then on the next 5 million the government pays 55% of the remaining loss or $2,750,000. The grower would pay $7,250,000. For the small cost of $100 dollars, you get what you pay for.

Our program would pay $9,990,000 of the 10 million dollar claim and replace the destroyed nursery stock. Our deductible is only $10,000.

The government does have the ability to increase the coverage, but the most they can insure, at prices that are 3 to 4 times ours, is 75% of the exposure. Using the 10 million dollar claim example; the first $2,500,000 is still uninsured.

We support the decision to purchase the $100 dollar policy, but strongly caution against thinking it will be adequate protection in the event of a claim.

The wildfires in California, the floods in Missouri, the freeze in Tennessee, and the wind damage in Atlanta should be reason enough for people to understand the need for protection. When we started this insurance program the only market insuring against natural disasters was the government. No one else is insuring live assets like we are.

Most attempts at insuring weather related claims for live asset risks were previously based on a flawed assumption that the fruit and the trees, bushes, shrubs and vines all needed to be insured together. We studied the data and found that claims could be quantified separately. This alone is the reason we put the program together. We found that insuring live asset was like insuring ourselves for health and life insurance. We get hurt, we lose limbs, and we sometimes die, maybe not always from old age. We wanted to create a “death” insurance program for living assets which included “destruction” coverage for trees, bushes, shrubs, plants and vines whose diagnosis is terminal after being injured by natural disasters.

Lenders request “live asset” insurance coverage for wind, lightning, fire, freeze, flood, earthquake, hail to protect their investments, like they request home insurance.