Do I need Crop Insurance?
Agri-business is an inherently risky business – few would argue that fact. Farmers and agri-businesses deal with things that most businesses don’t. They face many risks and challenges in their operations.
In particular, uncertain weather conditions are beyond the control of farmers and affect farm yields, creating variability in farm revenue. Adverse weather events such as drought, excessive rains and frost cause heavy losses to farmers. Climate change is introducing a new level of uncertainty into production agriculture, bringing periods of more intense heat or cold and abnormally high or low moisture. Farmers in Ukraine have experienced unusual weather patterns recently. Disasters can often not be prevented from happening but they can, to some extent, be predicted and arrangements can be made to reduce their impact.
Crop insurance enables farmers and agri-businesses to better deal with weather uncertainty and to rebound from its extremes. In its simplest form, insurance reduces risk by making payments to insured farmers when winterkill hits or yields fall below a guaranteed level.
Crop insurance helps farmers avoid losing money and sometimes avoid bankruptcy. Crop insurance enables farmers to borrow money to expand and improve their businesses. Bankers rely on crop insurance to reduce the risk of their loans to farmers. Crop insurance stabilizes the cash flows, ensures the continuity of business and increases credit worthiness and trust of investors. Crop insurance also provides the security that enables farmers to better forward market their crops.
Crop insurance helps farmers, agri-business owners and investors sleep better at night knowing that, should the unexpected happen, they will have the financial security to stay in business and go on to plant the next season.
How does crop insurance help manage these risks?
- Farmers buy crop insurance (winterkill insurance for the autumn-winter period, yield insurance for the spring-summer period).
- When a disaster strikes (for instance: frost, drought, hail), a loss adjuster comes out and verifies the claim. Within 30 days, the indemnities are paid to the insured.
The insurance process is fast and fair. Thanks to crop insurance farmers and agri-businesses are able to access the capital they need to get back to their fields.