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Hail Adjusting Issues

The adjustment of hail claims is not considered a competitive factor. All hail insurance adjusters are licensed and subject to standard adjusting procedures as approved by the Hail Insurance Council and the Superintendent of Insurance for the province of Saskatchewan.

SMHI is the responsibility of municipal governments. It is regulated by a statute of the legislature and is not governed by the Insurance Act of Saskatchewan. However, SMHI voluntarily adheres to the same hail adjusting standards used by the other companies.

All claims are adjusted in accordance with the copy written procedures outlined in the Hail Adjuster Manual approved each year by the Hail Insurance Council of Saskatchewan.

When spot-loss hail was part of Saskatchewan Crop Insurance, there was no requirement for adjusters to follow the same standards used by the rest of the industry. There was also an inherent bias due to the offsetting nature of hail and yield claims.

In some situations, a SCIC hail claim will simply offset a larger yield loss claim. In those circumstances, a SCIC adjuster can give producers a more favourable hail adjustment, knowing the claims are likely to be offsetting.

It’s in the best interests of producers to get more of their money from a hail claim rather than a yield claim. Hail claims are paid faster. Plus, a favourable hail claim adjustment from SCIC can be used to lobby for a better adjustment from private industry.

Members of the Canadian Crop Hail Association report a dramatic decline in adjusting controversies following the departure of SCIC from spot-loss hail in 2001.

Should Saskatchewan Reinstate Spot-Loss Hail?

Saskatchewan producers are being well served through private hail insurance. As the dominant player in Saskatchewan, SMHI ensures an equitable and competitive marketplace.

After SMHI, the next biggest player in the market, with about one-quarter of the total business, is Co-operative Hail Insurance Company. It operates on co-op principles, paying dividends to member customers in years when it is possible to do so. The other players in the market add competition and choice for producers.

Spot-loss hail coverage would give producers another reason to buy multi-peril insurance. While this would be perceived as a benefit to producers, the provincial government must determine if this is the best place to invest scarce dollars for safety net programming. A provincial investment in spot-loss hail would attract the lowest level of federal cost sharing.

Saskatchewan Crop Insurance participation is affected by premium rates and by the coverage levels available to producers. It can be argued that options such as Variable Price offer a greater benefit to producers – a benefit they are unable to get anywhere else. Plus, benefits such as Variable Price would be eligible for a much greater level of federal cost sharing.

Summary

• Providing a product readily available in the marketplace is a poor utilization of public dollars because it does not expand the producer's base of risk management tool options or increase individual coverage levels.
• There has been a rapid rise in producer rates for multi-peril insurance over the last five years and this has no doubt contributed to reduced participation.
• Private hail insurance rates are extremely competitive and the industry has more than adequate capacity to serve producers.
• The private hail insurance industry pays tens of millions of dollars each year for income taxes, premium taxes, sales commissions and the adjustment of losses.
• Money for sales commissions and adjustment of losses supports rural people and businesses.
• If SCIC reinstates spot-loss hail, there will be a duplication of services and more layering of insurance policies.
• Standardized industry adjusting practices will be regulated under three different Acts of the Legislature.
• Spot-loss hail falls into what the federal government calls High Cost coverage and would qualify for only 20 per cent federal cost sharing.
• Most farm safety net programming falls under the Comprehensive Coverage category and receives federal cost sharing of 36 per cent.
• Various enhancements to Saskatchewan Crop Insurance other than spot-loss hail would qualify for the higher level of federal cost sharing while also encouraging greater producer participation.
• A reinstatement of spot-loss hail under SCIC would mean government subsidized competition in an area already well serviced by private industry.