The Future of Crop Insurance: Trends That Impact Buying Decisions

The landscape in crop insurance is constantly changing. Hear from FMH's expert staff about trends that will affect farmers' risk management decisions in the latest InsureCast episode.

 

Plus, tune in for a special note from longtime InsureCast host, FMH's Ryan Benes! 

What is FMH InsureCast?

FMH InsureCast brings you the latest from FMH and the industry to help navigate the expansive crop and farm insurance landscape. Topics include new products to leverage crop insurance within your risk management plan, and helpful tips from FMH staff and industry experts to stay informed on industry developments.

VO: 00:02

Welcome to FMH InsureCast, a podcast created by Farmers Mutual Hail designed to deliver expertise and insights from trusted FMH team members and industry experts. Each new episode will dive into new products, industry updates, and innovative solutions. Let's get to today's topic.

Ryan: 00:20

Hello, everyone. Thanks for joining us today on the FMH Insurecast. Today, we're talking about what the future of crop insurance looks like, how the landscape is continuously changing, and what some of the trends are that we foresee for the future that will affect the decisions farmers will make when choosing their coverage. And, happy to have once again on the show with me today, Ken Ripley. Ken Ripley, go ahead and say hello.

Ken: 00:44

Hey, everyone. Ken Ripley, regional sales manager for Northwest Regional Farmers Mutual, and always fun to be on here with you, Ryan.

Ryan: 00:52

Perfect. Thank you very much, Ken. Ken, you know this, but before we get started, I wanted to share a quick personal note. The theme today is looking ahead to the future. And before we dig in, I've got something to share with our listeners, which is that this will be my last episode as host.

Ryan: 01:10

So I wanna thank everyone and share some last thoughts from this host seat, about the future of crop insurance, but maybe we'll reminisce a little bit at the end as far as, how far we've come with the FMH Insurecast as well. And maybe you can interview me, Ken. I don't know. Maybe that's maybe that's time, we pass the mic. I don't know.

Ryan: 01:29

What do you think?

Ken: 01:30

We can give her a shot.

Ryan: 01:33

Perfect. Perfect. Well, you know, we we wanted to get this episode in. We're it's, September 25th. So hopefully, this is this is gonna excuse me.

Ryan: 01:44

Not hopefully, but this is probably gonna hit folks a little too late for the 9:30 sales closing date. But we were thinking about how much crop insurance has changed over the last, say 5 or 6 years and wanted to take a second to reminisce about where we've come from and how we see the landscape changing. We've alluded to the fact that ECO in particular is, the subsidy change on that will have a huge impact on how farmers buy crop insurance. But maybe from even broader standpoint than that, Ken, I think we should touch on how we see crop insurance going for farmers over the next few years and the things that they'll need to look out for. I think it's especially important when we enter into an environment with lower prices that we really understand our risk management options and how they've significantly changed, in recent history.

Ryan: 02:37

So, yeah. Go ahead, Ken.

Ken: 02:39

I was gonna say, yeah. Absolutely. I mean, there's from the, you know, the years that we've been doing this, the discussions we've had to where we're at now on on products has just changed, you know, greatly. There's no question, like you mentioned earlier, ECO was gonna have a major impact on buying decisions going forward with the subsidy change. But, even looking forward to, and we'll touch on here a little bit, some new products that will be coming even for 25, that'll change the landscape even more.

Ken: 03:07

So, it's exciting. You know, I hear from agents sometimes they get program or product overload, but the reality is, in most cases, all these things are more beneficial for the producer and something that producers need to take the time and understand and see if it fits their operation. Some cases it won't, but many cases it definitely provides, provides that value that they need, especially in these, you know, these troubling downturn, of commodity prices.

Ryan: 03:37

Yep. 100% agree. And, you know, we're talking about the future. So much has changed. Maybe the one thing I'll just start off with, I'm sure I'll end with it too, is the same old, same old, and not looking at what our new options are is probably leaving dollars on the table.

Ryan: 03:55

We we really need to take a look at these programs both on the crop insurance side and with the FSA programs, because both of them will be very important for farmers going into the next few years. So I just highlighted a few things that I thought we would we have been seeing and we will see more of, and I think we could discuss each one of them. One of them is very obvious. We we probably, beat this to death a little bit on here, but there's gonna be more area plans and there's gonna be more area endorsements. And when we're talking about there, that would be your ECO, your SCO, your margin protection.

Ryan: 04:34

Those would be the main ones, Stacks for a cotton. Those types of plans have increased in popularity significantly. Not necessarily because they're area plans, but because they're high level, high subsidy plans. Would you say that's the same for you up north there, Ken?

Ken: 04:53

Yeah. Absolutely. There's there's no question that those are the big drivers and, and in gaining popularity, I was doing some look back here this morning, just shocked at the amount of growth, you know, kind of focused on ECO, for example, 2021, 1st year of that product, you know, there was 2,600 policies written now. In 2024, we had just shy of 60,000 policies written. So it's just, it's it's changing the landscape, and the same goes for the other area plans, SCO, margin, things like that.

Ryan: 05:27

Yeah. And we'll we'll touch on this maybe a touch later. But in the more immediate future, because of the subsidy change to ECO, we could see that policy count number easily doubling or tripling, for the 25 crop year. SCO might actually be going backwards, but that's because the FSA programs, particularly ARC County looks more attractive. But, definitely a couple of trends to pull out there.

Ryan: 05:55

And then I think you can tell me if you agree with me or not here, Ken, but I think with the opportunity to grab some very high end coverage, that's still not, you know, we're not we're still not talking about 2 or $3 an acre. You're you're still talking 10, $15 an acre. I do think we see some farmers opting for these higher end area plans and maybe backing down a level or even 2 on their underlying plan, to help pay for that bill. We're raising our trigger. We're relying on the county to do so, but we are paying for paying for our ECO coverage is really main main one here, through buying down on our underlying plan.

Ryan: 06:37

Do you think you'll see a lot of that as well?

Ken: 06:40

I definitely do, especially as I get into on my region, some of the the western states, you know, just when the underlying multi payroll costs are just, you know, the rates are just higher, just because of history and some of the losses that have occurred there. Gain those higher triggers, has worked well in the last few years, and I just don't see that changing a whole lot. And especially as, growers get more comfortable with that, that type of a mix, I 100% agree that we're gonna see a shift in some of that buying habit. Yeah.

Ryan: 07:13

So, yeah, we do expect that, both looking back and for the next 12 months, we'll see that trend. Right? We'll see more area plans, particularly ECO. We might see a little bit of a pullback in the underlying plans. But a lot of the rest of these topics are are really hinging upon our farm bill and their lack thereof is in terms of the farm bill.

Ryan: 07:36

So we're here at the end of September. There's still a few rumblings out there that we actually might get a farm bill done before the end of the year, but still seems like it's more likely to get an extension and then try tackle it again in 2025. But because of those things, there's some hints in the farm, but we've discussed them on the podcast before about where this policy might be going. One that I think is definitely important, not only whether there's changes to it or not, would be the ARC and PLC programs. We're in a lower price environment.

Ryan: 08:09

Those programs tend to help farmers more when we're in a lower price environment and particularly when we're coming off of a higher price environment. So the ARC and PLC programs as they are, assuming we have them as they are for 2025 because that's still not been extended yet, They will be very important programs for farmers to understand, and we're not just talking about corn and soybeans here. We're talking about all of the different crops, and some of them will be slam dunk ARC County. Some of them will be slam dunk PLC, but all of them have a much higher potential to pay in the next couple of years than they have in the past.

Ken: 08:49

Yeah. Absolutely. I've done some looking back here. Even just in 2024, you know, with with that actually, that that part of the farm bill that lets us increase our reference prices to 85% of the previous 5 year average. We actually saw, we saw movement up for our programs, for example, corn this year with our spring price of 4.85 dollars Actually, with 2023 landed, we're going to see 20 5 price even go higher up to $5.06 as their spring price, if we'll call it that for, for ARC.

Ken: 09:27

And soybeans, we're going to see that jump, you know, quite a bit. That's going to go up to $12.20 and I did see wheat's going to go up a little bit to 6.27. So it's no question the decisions at FSA, you know, short term probably are leading towards County Arc as the better of the 2. We will probably be the bigger question. You know, it's still part of a bit of a spread between the arc and the PLC price, but there's no question that at least for 25, it's looking like the arc is going to be the better selection as we see some downturn in prices from an actual commodity, commodity price standpoint.

Ken: 10:06

So definitely takes maybe one of our tools off the table, that being SCO, if producers decide to go County Arc, but, it's in, you know, as if with my farmer hat on with my, knowing how tight things are getting in the marketplace, having these tools, both at the FSA and through crop insurance. It's it's, it's definitely something that we need to pay a lot of attention to, for the this year and the coming years.

Ryan: 10:31

Yep. So just 2 other quick notes on that. The most important piece here is just understanding those programs and making sure that you're taking as big advantage of them because there are dollars that are gonna be out there. The second piece being is that as we look to the what has been, proposed in the Farm Bill, it's enhancements to these programs, whether it be through higher levels, through ARC County, or higher reference prices. And I know the reference price piece here has actually been a hang up and one of the things that's stopped the farm bill from moving forward.

Ryan: 11:08

But, in any case, I think you're looking at, if anything, enhancements to those programs or them continuing on as they are at the very least. And even if they continue on as they are, there's still dollars that are gonna be out there for farmers. Yeah. Absolutely. So on top of that, my next bullet here I have is just the constant conflict of SCO and the ARC County program.

Ryan: 11:36

Again, crystal ball looking at some of the proposals of the Farm Bill. There's some out there that would increase the subsidy on SCO and increase the level on SCO, say up to 88% or 90%. So say SEO today is a 65% subsidy. Some of the proposals involve going from 65% up to 80 and then increasing the level from 86 up to 88 or 90. Right?

Ryan: 12:06

Obviously, that would be an enhancement to the SCO program. On top of that, though, if they're moving that level up for SCO, they're gonna do the same for ARC County. So they're always gonna be in conflict with one another. ARC County is free program at FSA, different prices, slightly different yields, but same concept of an area base of coverage. But the ARC county program, of course, is free.

Ryan: 12:34

SCO is not free. But if you increase the level of subsidy on SCO, it becomes an even more attractive rate. It aligns with the farmer, what they planted better because we're going off planted acres versus base acres. It's not gonna be an easy choice, and it's gonna be a harder choice if we move to a higher subsidy on SCM. So those 2 will always be in conflict as long as those 2 exist together within the farm bill, and you can't have them both.

Ryan: 13:01

There's always gonna be, arc versus PLC question. And, Ken, I know you're very familiar with deciphering this and you've dug into these programs as well. Look into your own crystal ball and and tell me what you see with what's happening, with Arc and PLC or excuse me, Arc and SCO in in the future.

Ken: 13:22

Yeah, so, you know, I think a lot of that, from a kind of where you land in the nation to as far as what's your, what's your underlying multi peril rates cost really is going to also drive that decision. I farm in Southern Minnesota, so our, you know, we're pretty lucky that our multipro rates are fairly low. So it definitely tends to lead more towards the our county decision, but as I get out safer in the Dakotas where we have a higher line, higher rates, you know, the SCO, it's a true balancing act. You got to look at, especially when you could put our private endorsements on like SCO Plus, where we can make that individualized coverage. There's no question that it's not a slam dunk decision across the entire nation on these now, especially when you know from a cash flow standpoint, SEO, if you, you know, if you have that, that's gonna pay in, you know, June for a producer where, you know, our county is paying in, you know, October November at FSA.

Ken: 14:21

So they also have to bring that into play too, as far as cash flow from, from an operation standpoint. But, yeah, but that that conflict between those two is not gonna change, unless they really change the farm bill and just make it really exciting for us than the crop insurance world. We'll see.

Ryan: 14:37

Yeah. Yep. Most definitely. You know, you hit on something there, Ken, that I think is interesting. If you look here at, say, Iowa the the I states, Iowa, Illinois, Indiana, we're gonna tend to have very low fairly low multi peril rates for, say, your 70 5, 80, and 85 percent levels.

Ryan: 14:57

And, of course, Southern Minnesota would be included in that and some of the other fringe areas of the of the I states as well. But on top of that, you also have typically base acres on your FSA programs that are more closely aligned with what your planted acres are year over year. And when you expand out further into, say, the Dakotas and Missouri and Kentucky and Tennessee, and Michigan and all these other places, the base acres don't line up as well. And on top of that, the increase in the multi peril rates to go from 75 to 80 to 85 probably lend itself more to SCO over the ARC County programs the further away you go from the high states. Is that fair?

Ken: 15:46

Yeah. That's absolutely fair. I mean, and and I think a great call out would be, you know, for producers to truly take a look at their recap of what they have for base acres per crop because, you know, you you may be planting crop and the base for that crop, with County Arc just doesn't give you much of a safety net where you're better off to put it where it's individualized, where it's based on your APH as far as SEO or the coverage you get. You know, obviously, it's still a county trigger, but you you've got it matched to the acres you're planting. So, yeah, great great call out on that.

Ken: 16:19

I a 100% agree. Perfect.

Ryan: 16:22

Okay. This one's kind of exciting, Ken. I think we touched on this in the ECO podcast where we talked about the new subsidy, but there's also a new program coming out for 2026. I can hear some groans and moans out there from from people listening in. But, for 2026, there will be another top end option called MCO, which stands for margin coverage option.

Ryan: 16:51

Again, that is a a mashup between ECO and margin protection. And so it has some features of both, but it's a band of coverage like ECO, but it's sold in September time frame, and it does include some input costs, that go into the calculation for a payment. But I think when we look at what that might look like a year from now when we're we're gonna be selling MCO, the big question is do we buy MCO now or do we wait and buy ECO in the spring? And so I think those will also be in constant conflict with one another and determining whether we're, an MCO fan or an ECO fan, or if we have strategies or maybe even marketing plans that are built around 1 or the other will be important. But, you know, high level, we haven't seen rates yet.

Ryan: 17:46

We we've barely seen provisions on MCO, but high level, assuming they work fairly similarly to what we understand, what do you think about that conversation that's gonna be happening in the next, 12 to 18 months?

Ken: 18:02

Yeah. You know, quite honestly, I wish it would have came out this year because, you know, some of the things that MCO brings, it, you know, kind of gets rid of our issues with margin. I mean, I mean, that's probably the bigger thing for me, Ryan, is making it a cleaner decision, not having the offset, and and if there's a loss, your your revenue policy can wipe out your margin loss. I just think it brings simplicity to the policy. There's no question that it's gonna be, do you like the September price or do you like the February price?

Ken: 18:32

That is gonna be that's gonna be an individual decision, but the nice thing is everything we're hearing, they're gonna have the same subsidy on both. So it's gonna make it more of what I wanna lock in, how what is my crystal ball, and that's really what's gonna come down to. But having not having to worry about, you know, with like with margin today have have the, you know, concern or the potential for your individual loss to wipe out a margin loss where ECO may have a full payment in the spring. Those those concerns go away, which I think is a big win for for a fall, you know, or September price, purchase.

Ryan: 19:09

Perfect. Perfect. Yeah. That will be an interesting one. Certainly, another one of those things as a farmer, as an agent, you need to know it.

Ryan: 19:20

You'll need to know it come, say, next July and or August, and you'll have to unknow it pretty well because it's gonna be it's gonna be a hot topic, next summer. Yes. So, Ken, you might disagree with me on this next one. So I'm interested to see what you have to say. I I think this is my personal opinion.

Ryan: 19:41

I think we will see a slow migration away from hail and wind policies, not completely, but maybe, taking away some of the dollars or maybe we're only buying hail instead of the wind or a deductible or something simply because we have so much value that's in these top end products that it feels like we can't leave them on the table, but it might also mean that our budgets shrink for the rest of whatever we wanna buy, whether that be hail, wind, replant, any of the other named perils. I just see farmers looking to take advantage of these highly subsidized dollars. And in order to pay for that, if they don't want to increase their, you know, insurance bill significantly year over year, that they would maybe pull back on some of that hail wind replant. What do you think about that, Ken?

Ken: 20:37

Yeah. I think actually where I'm located, that shift has already started. You know, we've seen, you know, a quite a bit already of folks going with the 95% multi pearl, you know, the ECO, you know, in the past for us ramped products like that, and just foregoing the wind and hail. Again, that's not across the board. There's definitely areas where, you know, the perils of wind and hail are just, you know, more often than that happening that you just can't go without.

Ken: 21:06

But, you know, my farm, I haven't had, I haven't had wind or hail on my farm since we've had some of these endorsements available. So I'm already in that trend, so I don't disagree with you. It's it's, you know, it's again a a farm based decision. What are your biggest risk? And for me, typically, it was it's drowned out and it's, in it's, price drop.

Ken: 21:29

So that's where I wanted to put my put my premium dollars. So a 100% agree with you. I can't, can't disagree with you.

Ryan: 21:37

Well, I'm sure somebody does. Yeah. But I I will say it is there is some regionality or, you know, geography to this as well. So the further west you go tends to be more hail and wind or a bigger issue. And putting money into that bucket might seem more advantageous than putting it into an area plan.

Ryan: 22:00

But then again, as we move further West, it's been a trend in the industry that there, the rates, the options that are available in states like Nebraska, Kansas, and Colorado, not unrealistic to see rates going up or plans being taken away just simply because losses have been heavy. And that's that's not necessarily an FMH thing. That is an industry thing. So it's one of those where those folks out there probably might be more quick to disagree with putting money into the area plan bucket versus hail and wind, but, they may also see a shift in what they determine the value to be if rates would increase as well.

Ken: 22:43

Yes. Yeah. Yeah. Frequency of loss out there is, you know, probably drives the decision towards those products and that may not change. You know, unfortunately, just the rates of those products may change those decisions.

Ken: 22:54

Yeah.

Ryan: 22:56

I got one more bullet on here. It's just more about, you know, taking advantage of these options. They're these options being added in here make things more complicated, but they're also better deals for the farmer. So I I think in general, if you're ignoring these or if you're not digging into them enough to understand, you know, maybe I want I wanna grab SCO here, but not over here. Or I'm gonna do ECO in one county and MCO in another or something.

Ryan: 23:28

There's there's a lot of ways to take advantage of these, programs, but, any thoughts from you, Ken, on either any of these programs, how you look at taking advantage of them, or any other insights into what you see the future of crop insurance and risk management looking like?

Ken: 23:45

Yeah, actually, you know, I'm gonna say I think you're a great lead in for me to put a plug in for our new quoting system that's coming in November because I mean, there's no question, there's more options, complications, things like that. But there's tools, you know, I'm proud to say that here, and thanks to, a big thanks to you Ryan with your involvement in it, our new, quoting system FMHQ will roll out in November and that, that tool, will help you make some of these decisions with some with some look back features. So I I think that helps simplify or at least give you a little bit of a crystal ball of what what if I've done this in the past type of information. So yeah, the decisions don't get easier, and I don't see that changing unless there's something major changing to the Farm Bill, which as we do this podcast, I'm guessing there's gonna be a delay. So

Ryan: 24:40

Extension, hopefully. Right? Extension. Yeah.

Ken: 24:42

Just an extension. Please have an extension.

Ryan: 24:45

Don't let it because you know we we are making a lot of assumptions here today that we're gonna have the ARC and PLC programs in in 2025. But in reality, technically none of them exist yet. So, you know, I keep looking out at FSA's website for some updated information because the, the, marketing year ended on September 1st, but I keep forgetting. Well, they're probably not gonna update anything in here until these programs actually get renewed. So anyway, we we can calculate a few numbers manually out of there, but, FSA program has not released anything of importance for 25 unless they've done it in the last couple days.

Ryan: 25:28

Long and short of it, Ken, with all of these future changes and whatever unknown changes we don't even know about yet, with a farm bill always comes an extra dose of change. Be sure to check out all the training opportunities that FMH offers. Obviously, we have, update meetings, but we also have webinars. The FMH Insurecast is not going away just because I'm not gonna be host anymore. So all of those resources for, these programs and others, please take advantage of them.

Ryan: 26:03

There's a lot to learn. I guess maybe that's the point we're trying to get across is that there's a lot to be learned and resting on our laurels or rolling over policies from year to year is probably gonna leave dollars on the table for farmers. Ken, thank you for being one of my go to guests. I love chatting crop insurance with you. Do you have any questions for me?

Ryan: 26:30

Any comments on what we've talked about today?

Ken: 26:32

Yeah. But, you know, first off, just so I say it's been an absolute blast the last few years and always look forward to being on these with you and and appreciate your insight and your in your just, you know, pulse on top of what's going on across the nation. I think you've got a natural gift to that. So we're we're sad to see you go. Unfortunately, even the FMH, FMH family, but you're not leaving FMH knowing that you're you're going to the going to the other side of the business to be to be an agent.

Ken: 26:59

So we look forward to continue to work with you there. But I do have a question for you. So of all these, what has been your favorite, podcast memories?

Ryan: 27:11

I think, honestly, the one I always go back to is the very first episode that we did. And it was it was unique in a couple of ways. 1, it was during COVID, and I remember I don't know exactly why, but I recorded it from my parents' basement, which was interesting. But then on top of that, that first episode was about e c o. It was, it was about the fact that this new e c o program was coming along, and we'd done a little bit of research running into it.

Ryan: 27:46

And we had some really good numbers about what we expected payments to look like for all these counties. And I just remember it being an exciting time because we could see something brand new that we could go out there and sell. And now you could see that that same excitement has spilled over onto the, you know, the last few years of doing this. But that's really what this comes down to is us hunting down value for agents and farmers and spreading the word about that. So that's probably my favorite, memory, on top of doing some live recordings that we did at the National Agent Summit, which was in Kansas City in 2022, I believe.

Ryan: 28:27

So that was fun as well. Doing those in a live setting was was something interesting. But how how about yourself, Ken?

Ken: 28:33

You know, I have and I apologize. I can't remember which topic it was, but still one of the ones that always I remember is one of our first video recordings. And, you know, some of the listeners may know of Zach Galifianakis show, you know, Between Two Ferns. And we were around 1 hosta, if I remember right. And so we got a really good laugh about, you know, we should rename our live feed as round 1 hosta.

Ken: 28:55

But it was, yeah, just really have enjoyed every one of them. I mean, everyone's been fun. I mean, we've had, you've had some great guests on, too, and just, always enjoyed, whether I was on or not listening to the podcast and getting insight and and trying to, trying to, you know, improve my crop insurance knowledge or, you know, just broaden my broad my palette. So thank you again, Ryan, for all you've done.

Ryan: 29:21

No. Thank you, Ken. You're always the the go to guest here. So I love bouncing ideas off you. And from talking with folks out and out and about, they love your farmer's perspective.

Ryan: 29:31

So, I don't think you're gonna lose that anytime soon. So I'm sure folks appreciate that. Thank you. But, anyway, thank you, Ken, and thank you all of our listeners. The show will go on.

Ryan: 29:42

It might look a little different, but look out for some important crop insurance news and updates on future episodes. Be sure to subscribe to this podcast on your favorite podcast app, and make sure to follow us on YouTube where you can find our recent episodes as well. But I will sign off, for now or forever, I guess. Maybe maybe they'll have me back. I don't know.

Ken: 30:02

Yeah. We should bring you back as a as a as a guest on in the future. That'll be fun to kinda turn the tables.

Ryan: 30:09

So There you go. Perfect. Well, thank you, Ken. Thank you, listeners, and, you'll hear from the FMH Insurecast again soon.

VO: 30:17

You've been listening to FMH Insurecast. We appreciate appreciate you joining us today and would like to hear from you. If you have questions about today's topic or an idea to share for an upcoming podcast, you can contact us at FMH podcast at FMH dot com. Thanks for listening. This podcast is intended for information purposes only.

VO: 30:39

See policy provisions, terms, and conditions for details. Products underwritten by Farmers Mutual Hail Insurance Company of Iowa and its affiliates, West Des Moines, Iowa. Farmers Mutual Hail is an equal opportunity provider.