{"id":11804,"date":"2021-02-10T09:30:37","date_gmt":"2021-02-10T15:30:37","guid":{"rendered":"http:\/\/72.52.184.4\/~cropinsuranceina\/?p=11666"},"modified":"2021-04-26T11:55:16","modified_gmt":"2021-04-26T16:55:16","slug":"crop-insurance-basics-actuarially-sound","status":"publish","type":"post","link":"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/","title":{"rendered":"Crop Insurance Basics: Actuarially Sound"},"content":{"rendered":"<p>Unless you\u2019re an economist, an insurance guru, or a pension fund manager, chances are good you\u2019re not overly familiar with the term <em>actuarial soundness<\/em>.<\/p>\n<p>In short, it\u2019s a fancy way of saying \u201cthe math must work.\u201d<\/p>\n<p>For example, an actuarially sound pension fund will have enough money in the bank to meet future obligations. If not, and investments made by the fund are overly risky or too conservative \u2013 or expenses run amuck \u2013 then a whole slew of retirees could be left in the cold.<\/p>\n<p>Federal crop insurance, by law, must be actuarially sound. This ensures that the amount of money in the system is sufficient to meet the costs of paying claims when disaster strikes \u2013 and to establish a small reserve for possible extreme losses in the future. To achieve this goal, premium rates are adjusted regularly to reflect current market and crop conditions \u2013 a process that requires constant number crunching and research.<\/p>\n<p>This kind of diligence and regular adjustment becomes especially important for those areas where the weather is turning more and more extreme amid climate change. And on the flip side, adjustments can be made to reflect changing conditions that may indicate less risk.<\/p>\n<p>By being actuarially sound, the crop insurance system has a loss ratio performance mandate of \u201cnot greater than 1.0\u201d \u2013 meaning that over time, indemnity payments paid out to farmers should equal the total premiums invested into the system.<\/p>\n<p>Actuarial soundness has helped the program survive extreme events like the devastating drought in 2012, the worst disaster to hit agriculture since the Dust Bowl. But the system was managed prudently in the preceding years meaning that insurers had reserves to help pay $17 billion in indemnities and keep rural America afloat. The same could be said for the flooding and string of hurricanes seen in recent years.<\/p>\n<p>Things could have turned out much differently had crop insurance not been actuarially sound and historical premiums not been sufficient to cover long-term losses.<\/p>\n<p>That\u2019s why crop insurers invest in actuarial professionals, data collection and analytics. It\u2019s also why decisions made by policymakers carry such huge ramifications for farmers\u2019 most important risk management tool.<\/p>\n<p>Lawmakers must guard against creating new policies that reduce premium rates below future anticipated indemnities, increase risk within the system, or negatively affect the coverage that can be offered. Such policies will likely upset the fine-tuned balance that defines the crop insurance system and makes it affordable, widely available, and economically viable.<\/p>\n<p>In other words, the math must work.<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Unless you\u2019re an economist, an insurance guru, or a pension fund manager, chances are good you\u2019re not overly familiar with the term actuarial soundness. In short, it\u2019s a fancy way [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":22,"featured_media":9733,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30,35,37,38,25],"tags":[],"class_list":["post-11804","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-essential-strengths","category-industry-insight","category-risk-management","category-safety-net","category-whats-cropping-up"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Crop Insurance Basics: Actuarially Sound - Crop Insurance Keeps America Growing<\/title>\n<meta name=\"description\" content=\"This kind of diligence and regular adjustment becomes especially important for those areas where the weather is turning more and more extreme amid climate change. And on the flip side, adjustments can be made to reflect changing conditions that may indicate less risk. By being actuarially sound, the crop insurance system has a loss ratio performance mandate of \u201cnot greater than 1.0\u201d \u2013 meaning that over time, indemnity payments paid out to farmers should equal the total premiums invested into the system.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Crop Insurance Basics: Actuarially Sound - Crop Insurance Keeps America Growing\" \/>\n<meta property=\"og:description\" content=\"This kind of diligence and regular adjustment becomes especially important for those areas where the weather is turning more and more extreme amid climate change. And on the flip side, adjustments can be made to reflect changing conditions that may indicate less risk. By being actuarially sound, the crop insurance system has a loss ratio performance mandate of \u201cnot greater than 1.0\u201d \u2013 meaning that over time, indemnity payments paid out to farmers should equal the total premiums invested into the system.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\" \/>\n<meta property=\"og:site_name\" content=\"Crop Insurance Keeps America Growing\" \/>\n<meta property=\"article:publisher\" content=\"http:\/\/www.facebook.com\/cropinsuranceinamerica\" \/>\n<meta property=\"article:published_time\" content=\"2021-02-10T15:30:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-04-26T16:55:16+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/wp-content\/uploads\/2017\/07\/AdobeStock_5097241-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2000\" \/>\n\t<meta property=\"og:image:height\" content=\"1217\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Laurie Langstraat\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@UScropinsurance\" \/>\n<meta name=\"twitter:site\" content=\"@UScropinsurance\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Laurie Langstraat\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\"},\"author\":{\"name\":\"Laurie Langstraat\",\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/#\/schema\/person\/7cf19e3fe01a682ddad2c6dbc59b30f1\"},\"headline\":\"Crop Insurance Basics: Actuarially Sound\",\"datePublished\":\"2021-02-10T15:30:37+00:00\",\"dateModified\":\"2021-04-26T16:55:16+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\"},\"wordCount\":422,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/wp-content\/uploads\/2017\/07\/AdobeStock_5097241-1.jpg\",\"articleSection\":[\"Essential Strengths\",\"Industry Insight\",\"Risk Management\",\"Safety Net\",\"What's Cropping Up\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\",\"url\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/\",\"name\":\"Crop Insurance Basics: Actuarially Sound - Crop Insurance Keeps America Growing\",\"isPartOf\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/crop-insurance-basics-actuarially-sound\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/wp-content\/uploads\/2017\/07\/AdobeStock_5097241-1.jpg\",\"datePublished\":\"2021-02-10T15:30:37+00:00\",\"dateModified\":\"2021-04-26T16:55:16+00:00\",\"author\":{\"@id\":\"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/#\/schema\/person\/7cf19e3fe01a682ddad2c6dbc59b30f1\"},\"description\":\"This kind of diligence and regular adjustment becomes especially important for those areas where the weather is turning more and more extreme amid climate change. 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