The Risk Management Safety Net: Market Penetration and Potential

X. Low Hanging Fruit: Another Method to Increase Market Share of Existing Programs

Expansion and placement of insurance products in states and counties to increase the availability of coverage for producers is a critical task that requires ongoing, routine regular review. Growing areas for commodities may change over time because of changing consumer preferences affecting market demand, price changes and values of commodities, climate conditions, or agronomic, varietal changes stemming from new research and industry development, or other factors. New commodities are continually emerging and the risk management safety net must pay attention to these changes and adjust to provide the necessary risk management protection for U.S. producers.

Placement and Availability of Federal Crop Insurance

New crop insurance products and programs are initially piloted in areas identified as appropriate for testing and always as approved by the Board. Pilot areas may also be expanded with Board approval. Once a new product or program has been adequately tested and the Board determines the program should be made permanent, the crop insurance product may be expanded to any additional appropriate areas within the U.S. Expansion is generally made to growing areas where RMA is aware the crop exists, there is some history or experience of the crops performance, and where there is demand for the product.

Many, but not all, policies contain provisions that allow for a ‘written agreement’, which is the ability for an insurance company to write an insurance policy for a crop in a county where the crop program is not specifically available. While written agreements can provide flexibility in the risk management safety net for producers, many producers may not always be aware of their existence. It is important that producers know they can ask for written agreements and that they work with their crop insurance agent. If a program is not available in their county, producers can notify their RMA Regional Office to request program expansion and assist in providing the needed data for such expansion effort.

Market Potential

RMA compared state level NASS information to the state availability for all Federal crop insurance crop programs to determine if there were states with potential for product expansion. The crops and areas that showed the most market potential are shown in Exhibit 2. This Exhibit shows commodities that have significant uninsured acres in the various states, and also shows both insured and NASS acres and identifies where insurance is currently available. In cases where insured acres are present but there is no insurance program in the county, this represents written agreements that have been approved to insure the crop in those states.

Utilizing existing policies to expand availability into other additional states is a ‘low-hanging fruit’ method to increase market penetration since generally limited product development is required and data are already likely to be available. While this is a good way to identify potential expansion areas, additional research is required for these identified crops and states to determine if:

• The applicable crop policy would be appropriate and effective in these potential expansion areas for the unique risks faced by producers in the production of the commodity. Production practices in each expansion area must be researched to assure that the policy and procedures are appropriate for the specific crop and location. The crop must be measurable at the beginning of insurance and losses must be identifiable and measurable.
• Actuarial and underwriting information, including data for premium rates, price elections, planting dates, etc., can be appropriately determined for the crop and area.

The table below is a summary of some of the strongest possibilities for further research as potential expansion areas to increase market penetration.

Contact Information

For more information, contact RMA Public Affairs.