LUBBOCK, Texas – Crop insurance companies are considering dropping some of their business in Texas because years of drought have led to more claims.
Joe Brown, who has owned his crop insurance agency, Joe Brown Crop Insurance, for 18 years, said insurance companies have done this before, but not to this extent. He said companies can’t keep up because there have been too many weather-related claims.
“Texas has historically been well over a 100% loss ratio, where more money is paid out than comes in,” Brown said. “Recently, it has been as high as 200 to 250% loss ratios.”
So in order to keep going, Brown said, some insurance companies are having to drop some business in Texas.
“Some of the biggest companies in the area that have the most market share are looking to right-size their book of business so they’re not as exposed,” Brown said.
Brown says these companies can’t just raise rates to stay afloat.
“Those rates are not set by the companies,” Brown said. “Those rates are set by a national body called the RMA, the Risk Management Agency, which is part of the government that administers the crop insurance programme.”
The companies then administer the policy. This means that taxpayers pay about 60% of crop insurance premiums and farmers pay 40%. Brown says the companies’ compensation has been cut in half.
“Yet the companies have continued to have increased losses and exposure with about half the percentage of the previous compensation, which is very difficult to make a return on,” Brown said.
Brown says this will have an impact on agriculture in Texas, including the agents.
“That agent now has to go out and find a company to place a farmer with, and if that becomes terribly difficult, then the farmer now has to make the decision, ‘Can I continue to work with my agent’,” Mr Brown said.
He says don’t worry. Producers will find an insurer because as these companies reduce their business, others will increase their business.
“There will always be a place for a farmer to find insurance,” Brown said.
Brown says the difficult part may be the change itself. A farmer may have dealt with a particular company and agent for years and now may have to go elsewhere.
