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History of Spot-Loss Hail Coverage

Saskatchewan Crop Insurance was first available province-wide in 1973. From then until 1991, spot-loss hail coverage was included in the program. In fact, producers could “double dip”. They were able to collect for hail damage and still be paid for any yield shortfalls on their production. There was no offset between spot loss hail coverage and yield loss. Every year, there were some producers who did very well by having a large percentage of their land base hailed out.

In 1990, hail coverage was dropped from Saskatchewan Crop Insurance. In 1994, it was reinstated, but the “double dip” was discontinued. Payments for spot loss hail damage were deducted from any yield shortfall payments under the multi-peril program. As well, producers were limited to a maximum of 70 per cent yield coverage if they wanted to take the hail insurance option.

The 1994 reinstatement was to increase Saskatchewan Crop Insurance participation after the cancellation of GRIP, the Gross Revenue Insurance Program. Spot-loss hail was then discontinued in 2002 to enable the funding of a stronger multi-peril program.

Cost of Spot-Loss Hail

Figures from Saskatchewan Crop Insurance indicate that producers paid 60 per cent of the cost of spot-loss hail in 1997. For 1998 and 1999, the producer share dropped to 50 per cent. In 2000 and 2001, the producer share was 40 per cent.

In the final year of spot-loss hail, over 20 million acres was insured. The producer premium was $23.3 million. The province and the federal government each paid roughly $17.5 million. The total cost would have been higher if producers had been allowed to choose the 80 per cent Crop Insurance coverage level and still take the hail option.

The information on government premiums does not tell the full story. Figures compiled from the 2001 Annual Report from Saskatchewan Crop Insurance Corporation show the farmer premium from 1994 to 2001 totaled $146.7 million. Over that same time period, hail losses totaled $365.8 million. The true cost of spot-loss hail over those eight seasons was therefore $219.1 million ($365.8 minus $146.7).

A portion of the spot-loss hail payments went to offset yield loss claims each year. The net hail offset totaled $49.8 million. This is the saving in yield loss claims due to hail loss payments that had already been made.

Taking the cost of spot-loss hail for the time period ($219.1 million) and subtracting the net hail offset ($49.8 million) leaves a total cost to Saskatchewan Crop Insurance of $169.3 million.

The spot-loss hail premiums contributed by both levels of government for the eight years totaled $158.6 million. After adding in the administration costs and loss adjusting costs of the spot-loss hail option, it’s clear that the multi-peril program helped subsidize the cost of spot-loss hail.