Crop Insurance: An Approach That Better Fits This Nation’s Fiscal Reality

The historic drought that wilted the corn and soybean fields of Illinois and other Midwest states was one of the costliest events to hit rural America in decades. As the nightly news reported, losses on farms in large swaths of the Midwest were staggering, with some farmers having such low yields that harvesting was a waste of time.

I feel like I live in an oasis. The drought and heat wave that crippled farmers in neighboring counties and nearby states somehow spared my farm and a few others here in north central Illinois. I don’t know if it’s where the farm is located, the soil it sits on or just the luck of the draw in getting a few rain showers here and there, but somehow, I was spared. This makes me feel lucky, on one hand, since I did not face the dread of losing my crops, but guilty on the other hand because so many other farmers did.

In past years, a disaster on this level would have triggered a massive, ad hoc disaster bill in Congress, which would have given every farmer in Illinois and most other Midwest states – including farmers like me who had a good crop –federal disaster assistance. This approach to farm disasters is not only expensive for taxpayers but wastes money by offering a “one-size-fits-all” remedy.

Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989. That’s a very expensive, cumbersome and untargeted approach to managing natural disasters. Realizing that fact, Congress, in the mid 1990s, decided to encourage farmers to purchase crop insurance by offering them a discount on their premiums if they did so. The idea was that if crop insurance was affordable and widely available, farmers would already have insurance in place when a natural disaster strikes.

And guess what? It worked. The year 2011 saw an unprecedented string of natural disasters, ranging from an early freeze, to floods, droughts, wildfires and hurricanes. The year 2012 saw the worst drought in decades. But despite these calamities, Congress wasn’t pressured for a major farm disaster bill, because more than 86 percent of planted farmland was protected by crop insurance in 2012.

That’s why I buy crop insurance every year to protect my farm, my family and my investment. Crop insurance is a public-private partnership that has become this nation’s new hybrid approach to risk management, and taxpayers don’t pay out all of the losses when disaster strikes. Private insurance companies take a hit, and farmers fund much of the payments through premiums paid out of their own pockets.

And farmers are happy to fork over more than $4 billion annually because they love crop insurance. First, farmers sit down with their crop insurance agents and design and purchase their own plans, tailored specifically to their farms, their crops and their comfort with risk. This gives farmers some peace of mind when the things go awry.

When disaster strikes and there is a verifiable loss, crop insurance indemnities are managed and delivered by private sector companies, usually arriving within 30 days of a claim being finalized. Large disaster bills – like the Hurricane Sandy relief bill – took three months just to pass Congress and will take months more to get help into the hands of the victims.

I started buying crop insurance about 11 years ago, because in farming, the costs of the inputs are so high, that you have to have some kind of backup plan in place. In addition, most of the farmers I know have to borrow operating loans every year from banks, which often require crop insurance as collateral for the loan.

Consumers should like crop insurance, too. The availability of a safe, affordable and healthy food supply requires the presence of some form of disaster protection for farmers, who increasingly face wild weather patterns that challenge the food production system. In the U.S., the ability for farmers to purchase crop insurance is actually this nation’s “insurance policy” against widespread food shortages or sharp price hikes in food products.

I sleep a heck of a lot better at night because I know I have crop insurance coverage. If I have a major loss, I know I have a backup plan. I certainly won’t make any money off of my insurance indemnity, but I also won’t lose the farm. And if I’m lucky enough to not have a loss, I collect nothing other than the proceeds from selling my crop — which is the way the market is supposed to work.

Patrick Solon is a corn and soybean farmer and lives in Streator, Illinois. This op-ed appeared in the Ottawa-Streator Times on March 15, 2013