|
| |
A Description of Multiple Peril Crop Insurance
MPCI coverage is designed to insure the yields of farm producers over an entire growing season on an all risks basis. The primary cause of loss is weather, either for a single identifiable event or over an extended period. More specifically, perils include wind, rain, drought, hail, fire, prevented planting due to too much rain, flood, disease, insects, cold, frost, or any other reason for low yields. Due to the high damageability of crops, coverage is only provided in excess of a large deductible. The MPCI program currently provides coverage for almost 100 crops in all 50 states, but not including the District of Columbia. The program is gradually being extended to cover additional crops not currently insured. Crops currently being evaluated in pilot programs include cabbage, sweet cherry, winter squash, wild rice, and watermelon.
Since the Federal crop insurance program is a public/private partnership, public policy considerations have a significant influence on the operation of the program. For example, insurers are required to accept all applicants. In addition, the farm producer selects the amount of coverage to be purchased. Since Congress regularly evaluates the operation of the program, pricing and policy design decisions may differ from those that would be made if MPCI were solely a private insurance program. Public policy considerations may also result in unanticipated changes to the coverage after the policies are sold.
The MPCI premium is computed as product of the published rate and the exposure. Generally, the premium is paid at the end of the cropyear. The MPCI exposure is the liability measured in hundreds of dollars. The liability represents the total insured value of the crop, and is the product of:
the selected Coverage Level
the Base Price for the crop, and
the Price Election percentage.
|