Audio courtesy of Susan Carter with USDA.
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USDA Risk Management Agency announced today an update of the current calculation of crop insurance premiums.
The current method of calculating rates, in part, weighs each year since 1975 equally when determining crop insurance premiums. Following the advice of an independent, peer-reviewed study, RMA has decided to adopt a 20-year moving average whereby current years are given more weight by adding the current year and dropping the first year to keep the number at 20.
The real question, though, is whether or not producers’ crop insurance premiums will go up as a result of the new rules. Good weather that factored into the average is now lost, and with a smaller sample size, some are concerned that poor weather will be weighted more heavily than is appropriate.
USDA RMA Administrator Bill Murphy says he’s gotten a few questions about the new update, and while he says most problems have already been foreseen, he adds that nothing is truly certain yet.
