Record crop insurance payouts in 2021
Working in agriculture requires the ability to withstand unpredictable events. To protect producers from designated perils that lead to production loss, Agriculture Financial Services Corporation (AFSC) provides a suite of insurance programs. These programs provide protection for producers from financial losses due to circumstances beyond their control.
Given the challenging growing conditions province-wide during 2021, the value of the AgriInsurance programs will be realized as a large number of clients are triggering significant claims. AFSC’s insurance indemnity payouts are predicted to be one of the highest in its 80-year history, and will help provide financial relief in an extremely trying year for clients.
Putting money in producer’s pockets
AFSC has several options for the client to receive funds in a timely manner when their crop is in a production shortfall. Depending on the information provided by the client on their Harvested Production Report, one of the following options will be available:
- Advance payment options; provides clients with a portion of their claim on a crop-by-crop basis prior to an on-farm inspection; a post-harvest inspection will be completed on the farm later in the winter by an AFSC adjuster to finalize any previous payments.
- Payment by Declaration; provides full payment based solely on the client’s reported information without an on-farm inspection.
AFSC is focusing on completing post-harvest claims for clients who are feeding grain or did not receive an advance payment. On average, AFSC completes 3,600 post-harvest claims and this year it is projected there will be upwards of 8,000. Currently over 5,000 claims have been completed or are in progress. Producers can track AFSC’s claim progression by clicking on the following link https://afsc.ca/crop-insurance/insurance-claim-progression/ At this time, AFSC anticipates that 75 to 80 per cent of clients will be in a production shortfall this year.
Earlier this year, the federal and provincial governments announced a joint $340 million AgriRecovery response to help cover extraordinary feed and water access costs being incurred by Alberta’s livestock producers. The 2021 Canada-Alberta Livestock Feed Assistance initiative includes two phases, an initial payment and a secondary payment. Applications for phase one closed November 1, and to date, AFSC has processed $176 million in payments. Phase two applications open in early January.
Insurance Crop Fund Reserve
The insurance crop fund reserve is in place to protect future insurance payments. In 2020, there was enough money in the fund balance to mitigate against a potential major future event, and help support clients with discounted premiums without posing significant risk to the overall program. This led to the introduction of the Alberta Premium Reduction in 2021, which saw Alberta farmers receive a 20 per cent reduction in crop insurance premiums for the 2021 crop year.
Due to the major weather events of 2021, AFSC is analyzing the current fund balance to determine the impact on the Alberta Premium Reduction for 2022. Based on the healthy fund balance in 2020, the plan was to continue providing Alberta producers with a premium reduction for a five-year period revisited annually and adjusted based on the events of the previous year.
Looking at the forecasted losses for 2021, there will be a significant decrease in the fund reserve. Final indemnity payments will not be known until all post-harvest inspections have been processed, though based on the current estimates, it is expected that the Alberta Premium Reduction is no longer sustainable.