It\u2019s not uncommon for a bank to ask for\u00a0proof of insurance prior to lending you\u00a0money. If the car, boat, or home for which\u00a0you are seeking financing is destroyed, the\u00a0bank needs some peace of mind that\u00a0insurance will be there to cover the loss of\u00a0its investment.<\/p>\n
Agricultural loans are no different\u2014except\u00a0those loans are much larger than the ones\u00a0most of us take out. And the risks that farm\u00a0borrowers \u2013 particularly small farm\u00a0borrowers \u2013 face every day are much greater\u00a0than those facing everyday citizens.<\/p>\n
Crop insurance has been the best tool to\u00a0mitigate this extreme risk, which ranges\u00a0from Mother Nature, to volatile markets, and\u00a0heavily subsidized foreign competitors.<\/p>\n
Better risk management also made it\u00a0possible to obtain essential capital during the\u00a0down economy, and the relationship has\u00a0paid big dividends for rural economies.<\/p>\n
The Federal Reserve of Kansas City noted,\u00a0\u201cIn 2010, rural America was at the forefront\u00a0of the economic recovery.\u201d<\/p>\n
But that success story is under attack right\u00a0now in Washington, as lawmakers target\u00a0crop insurance for yet another round of\u00a0funding cuts and new regulatory burdens.\u00a0The most serious threat comes from an\u00a0amendment to subject crop insurance\u00a0participation to a means test.<\/p>\n
In other words, insurance benefits would be\u00a0stripped away from larger, well-established\u00a0farms and ranches. It seems innocent\u00a0enough. After all, no taxpayer likes the idea\u00a0of government dollars being spent on\u00a0wealthy people when so many others are\u00a0struggling.<\/p>\n
But this amendment holds serious\u00a0unintended consequences and could wind up\u00a0harming not only small farmers, but farmers\u00a0and ranchers of all sizes and income\u00a0brackets, right along with the local\u00a0economies they keep afloat.<\/p>\n
Think of it this way. If you removed all the\u00a0safe drivers from the auto insurance pool, or\u00a0all the homeowners outside of floodplains,\u00a0house and car insurance\u00a0wouldn’t\u00a0be\u00a0affordable for anyone. That\u2019s because\u00a0insurance companies have to spread risk and\u00a0delivery cost out across a diversified\u00a0customer base to make products more\u00a0available for all. For every risky policy, you\u00a0need one with little risk.<\/p>\n
If the amendment passes, the farmers left in\u00a0the insurance pool will have to fork over\u00a0more for premiums, and even then, their\u00a0quality and speed of service will likely\u00a0diminish as insurers wrestle with shrinking\u00a0profit margins or losses.<\/p>\n
Some will argue that the government\u00a0shouldn’t\u00a0be involved in crop insurance at\u00a0all. That\u2019s not realistic.<\/p>\n
That would leave America in the same\u00a0position it was in before we had a vibrant\u00a0crop insurance system, when costly ad hoc\u00a0disaster bills came before Congress nearly\u00a0every year and taxpayers\u2014not private\u00a0insurers\u2014bore all the risk.<\/p>\n
For this reason, the country\u2019s major\u00a0financial institutions are urging Senators to\u00a0vote no on all crop insurance amendments\u00a0that would harm the crop insurance\u00a0infrastructure.<\/p>\n
Damaging the effectiveness and\u00a0affordability of what\u2019s left of Iowa farmers\u2019\u00a0safety net and their most important risk\u00a0management tool would only worsen the\u00a0economy as a whole.<\/p>\n
Alan Rosendahl is a Senior Vice President\u00a0at Iowa State Bank and a farmer who\u00a0resides in Kesley, Iowa.<\/em><\/p>\n This op-ed appeared in Agri-News on June\u00a028, 2012<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" It\u2019s not uncommon for a bank to ask for\u00a0proof of insurance prior to lending you\u00a0money. If the car, boat, or home for which\u00a0you are seeking financing is destroyed, the\u00a0bank needs […]<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,1,20],"tags":[41,51],"class_list":["post-2969","post","type-post","status-publish","format-standard","hentry","category-headlines-and-media","category-news","category-news-headlines","tag-congress","tag-safety-net-2"],"yoast_head":"\n