Crop Insurance Product
Group Risk Plan (GRP)
Group Risk Plan (GRP) is an alternative program to the MPCI (APH) plan of insurance. It provides protection on a county basis rather than an individual basis. To understand the concept of GRP, you must first understand some of the terminology.
Expected County Yield: NASS (National Agricultural Statistic Service) establishes an expected county yield for each crop. Planted, harvested, and unharvested acres, in addition to yield trends, are used in establishing these yields.
Maximum Protection per Acre: A set dollar amount of coverage. Federal Crop Insurance Corporation (FCIC) sets a specific dollar amount of coverage per acre. The insured selects from 60% to 100% of the maximum protection per acre. Cat coverage is available at 45% level.
Level of Coverage: Also known as Trigger Yield. This is a range of from 70% to 90% of the Expected County Yield in 5% increments. Cat coverage is available at the 65% level.
Insurable Acres: The net acres of the insured crop in the county reported to the Company by the Acreage Reporting Date.
Example 100 acres of soybeans at 100% interest
100 acres of soybeans at 50% interest with Jones
100 acres of soybeans at 50% interest with Smith
200 net acres at 100% interest in this county
How is Coverage Established?
Insured must do two things.
1. Select a dollar per acre amount of coverage. This is 60% to 100% of the Maximum Protection per Acre. Cat is available at 45% of the maximum amount. Once this dollar amount is selected, it will be used for two different functions:
a. Establish liability per acre for premium calculation
b. Calculate payment in the event the Actual County
Yield is below the Trigger Yield.
2. Select a Coverage Level. This is 70% to 90% of the Expected County Yield. This will establish a Trigger Yield and subsidy level for this crop.
Example of establishing Protection Per Acre and Trigger Yield:
County: LaSalle
Crop: Soybeans
Expected County Yield: 46.3 bushels
Maximum Protection Per Acre: $364.61
200 net acres planted
The Insured must select:
1. Coverage Level - 70% to 90% of the Expected County Yield of 46.3 bushels per acre. Assume the insured selected the 90% level of coverage. This would establish a trigger yield of 41.7 bushels per acre. When NASS determines the Actual Yield per Acre for LaSalle County in the Spring, a claim is triggered if the actual yield per acre is below 41.7.
2. Select a Dollar Amount of Protection - This dollar amount may be any amount from 60% to 100% of the Maximum Protection Per Acre set for each county and crop. In this example, the Maximum Protection Per Acre is $364.61. The insured may select a dollar amount from $218.77 per acre to $364.61 per acre. Only one amount is allowed per crop and county.
Loss Award Example
Using the above information, a loss would be paid under the following situation. NASS will gather the yield information after harvest is complete. No payments can be calculated until the final yield information is released in March of the following year. Assume the Actual County Yield for LaSalle County soybeans is 35 bushels per acre. This is below the Trigger Yield of 41.7 bushel per acre, therefore, a loss would be paid. This insured selected 100% of the Protection Per Acre, which is $364.61.
The formula for the claim payment is:
(Trigger Yield - Actual Yield) / Trigger Yield = Loss Award Percentage (41.7 - 35) / 41.7 = 16.1%
Protection Per Acre x Loss Award Percentage x Acres = Loss Award 364.61 x 16.1% x 200 net acres = $11,740 Loss Award
Advantages of GRP coverage:
Cost is generally less than other individual types of coverage such as APH,CRC, RA, and IP.
Cost per acre is the same for high-risk acres as regular rated acres.
No APH yield reports necessary. However, it is recommended that the insured update yield history in the event that plans of coverage are changed in following years. Provides an affordable insurance plan.
Disadvantages of GRP coverage:
No loss payment to individual units.
No replant provisions.
No prevented planting coverage.
No payments until the following year.
When must this decision be made?
All decisions regarding coverage and triggers must be made by the sales closing date.
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