[pages]
1 | 2 | 3 | 4 | 5 | 6

Sask Crop Insurance Multi-Peril Program

Year	No. of Customers	Insured / Seeded Acreage	Average Customer Premium	Producer Rate
00-01	34,121	74%	1,064	2.3%
01-02	33,917	74%	1,260	2.1%
02-03	33,814	74%	2,381	3.3%
03-04	33,012	70%	3,604	4.5%
04-05	31,384	70%	3,306	5.2%
05-06	29,778	70%	3,391	5.6%
06-07	27,927	64%	2,893	5.7%

The number of Saskatchewan Crop Insurance customers for the multi-peril program has been gradually declining. Some of this is due to the decrease in the number of farms as production units become larger.

The ratio of insured acreage to seeded acreage had remained stable at 70 per cent up until this year. Some and perhaps much of the drop to 64 per cent in the current year can be attributed to the excess spring moisture in northeastern and east central Saskatchewan that prevented seeding. This same factor will have played a role in the decline of the average customer premium.

Large payouts in 2002 created a deficit in the program, which has contributed to higher rates. In 2001, the last year of SCIC spot-loss hail, the average producer premium was 2.1 per cent. The average producer premium for 2006 was 5.7 percent. This is an increase of 171 per cent over five years and has no doubt caused some producers to reconsider their participation.

For the years 1994 to 2004, producer premiums for multi-peril totaled $764 million (about 3.9 per cent of liability). Government premiums for that time frame totaled $1.286 billion (about 6.5 per cent of liability). Losses for that time frame were $2.5 billion.

Canadian Crop Hail Association (Saskatchewan)

Although some companies have liability limits in some areas, producers always have access to insurance from a number of companies. Over the years, SMHI has requested increases in the maximum level of insurance it can offer. The increases were to meet the needs of producers who wanted to cover their increasing costs of production.

From 1994 to 2001, the maximum insurance coverage through SMHI was $100 an acre.

That has gradually increased to the current maximum of $150 an acre.
Rates are set for each township based on the hail claim history. Farmers typically
compare the rates offered by each company as they make their hail insurance choices.

This year’s estimated industry loss percentage of over 96 will translate into large losses for the industry after administration costs, sales commissions and loss adjusting expenses are totaled.

Year	Premium ($million)	Losses ($million)	Loss Percentage
2001	76.9	87.3	113.6
2002	94.8	52.8	55.7
2003	48.6	32.9	67.6
2004	108.0	56.8	52.6
2005	117.4	76.1	64.9
2006 (estimate)	101.7	97.7	96.1

 

Hail Insurance Rates

SMHI Average Charged Rate
1966	-	5.48 %
1973 to 1982	-	below 4.0 %
1976	-	3.41 % (lowest in this period)
1989 to 1993	-	below 4.0 %
1997	-	6.02 % (highest in this period)
2003	-	5.03 %
2004	-	5.17 %
2005	-	5.20 %
2006	-	5.00 % (estimated)

As the largest insurer, it’s instructive to look at SMHI hail insurance premiums as a proxy for what’s happening in the industry. SMHI does business in 3,550 townships. Rates are established in each township based on the claims history.

All companies quote a basic rate, which typically applies to wheat, durum, barley, oats and flax. The rate for canola is typically 1.75 times the basic rate, while the rate for crops like lentils and peas is usually 2.0 times the basic rate.

SMHI’s basic rate for 2006 averaged 3.76 per cent. In 265 of the 3,550 townships, the basic rate was in excess of 6 per cent. The minimum and maximum SMHI basic rates were 2.5 per cent and 8.5 per cent respectively.

While the basic rate averaged 3.76 per cent for 2006, the average charged rate was approximately 5.0 per cent. This takes into account the insurance of crops such as canola, peas and lentils. It also takes into account the deductible products, which are offered at a somewhat lower rate.

It should be noted that producers pay their SMHI hail insurance premiums when they pay their property taxes. Early payment of property taxes results in a discount of both the taxes and the hail insurance premiums. The average charged rate of 5.0 per cent is before any allowance for statutory discounts.