Devotees of GRIP (Group Revenue Income Protection) insurance may be in the minority, but their beloved policy may be meeting a quiet death this crop insurance season--deliberately priced and nit-picked to the grave.
Only 13% of Illinois' corn acres were insured by GRIP in 2011, down 60% since 2006, according to the University of Illinois. Since 2006, RMA has taken the following actions to reduce the attractiveness of GRIP coverage, notes Ken Harrison, Senior Risk Management Specialist, Central Crop Insurance Services, Overland Park, Kan.:
--Lowering the producer premium subsidy on GRIP relative to individual revenue policies. For example, the government subsidizes only 43% of premium cost at the highest level of coverage versus 55% for the highest level Revenue Protection (RP) policy, other agents tell me.
--Enhancing individual programs such as highly subsidizing enterprise units to make RP policies affordable. This year it is offering a Trend-Adjusted APH Yield option that can have the effect of boosting an 85% corn-soybean RP policy to a 90% policy.
--Proposed that growers with GRIP/GRP policies must report actual APH yields in the future, even though their policies are based on county yields, not actual. For 5,000-acre and up growers who liked the paper-free advantage of GRIP, this is another negative.
"You have to evaluate everyone's case individually, but we're advising many of our GRIP customers to move to individual policies because there's just more stacked on the RP side this year, depending on the farm's yield history," says Tyler Silveus, vice president of Silveus Insurance in Warsaw, Ind., and one of the biggest proponents of GRIP coverage in the past. The new Trend-Adjusted option alone "definitely has the potential to significantly reduce the acres buying GRIP," he adds.
GRIP fans favored this county-based plan because it offered far superior revenue insurance than any other offering in the Risk Management Agency database. Given that seed genetics mean price is a bigger risk factor than yield on today's farms, that had been a persuasive argument for coverage.
For irrigated growers, livestock feeders without production proof, those who farm floodplains, those who lacked RMA-approved yield records--GRIP made much sense. As the University of Illinois' crop insurance database shows, a corn 90% GRIP-Harvest Price Option policy in DeKalb County, Ill. averaged payments of about $162/acre and paid 51.2% of the time. A 75% RP policy paid an average of $44.30 and qualified for a claim 29.4% of the time.
On the other hand, GRIP does not provide individual protection for hazards like wind, prevented planting, replant, hail or even subpar grain quality. Some of its sharpest critics described it as a form of gambling, not insurance.
One Iowa crop insurance agent complains that "in many agents' opinion, GRIP/GRP has been a significant waste of taxpayer dollars" given the country's budget deficit. A maximum 90% GRIP policy would cost a farmer $110/acre in central Iowa, plus a federal premium subsidy of $86, or $196/acre total cost. A comparable 85% RP-Optional Unit policy would cost a farmer only $55 plus $34 with federal subsidies, for a total cost of $89, he says.
"It doesn't mean that GRIP isn't valid for some, it just isn't sustainable long term," the agent says.
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