Importance of Eligibility
AgriInsurance is based on the following principles:
Production offsets within a crop type
- Indemnity payments occur if total production for an insured crop falls below a pre-determined coverage level.
- Low production from one field may be offset by higher production from another field of the same crop.
- Indemnities are paid on the shortfall between total production and total coverage for the entire acreage of an insured crop.
- Premiums charged are calculated based on offsetting production at the whole farm level.
- Premiums that fund the program come from participating producers and the federal and provincial governments.
- Total premiums paid should exceed claim payouts over time.
- Premium rates are directly related to the probability of loss due to natural hazards.
Fairness and equity
- Splitting a farm operation into two or more units with separate contracts reduces the amount of offsetting and increases the probability of claim payments. Such payments must be made up by all participating producers and the two levels of government through increased premium rates
- Monitoring contract eligibility is necessary to ensure fairness and equity for all producers.
- Monitoring contract eligibility is also necessary to maintain the affordability of premium rates.
Long-term financial viability
- The added cost related to farm splitting (i.e. allowing unwarranted farm units) erodes the overall effectiveness of the program.
MASC has developed a process to determine eligibility that is consistent and objective. The following points summarize this process.
- Assessment of independence begins with a questionnaire completed by the producer and the MASC insurance specialist at the time of application for a contract.
- The questionnaire provides information on land tenure, machinery use and ownership, grain storage, farm management decisions and finance.
- These questions have been reviewed by the Human Rights Commission.
- The information is reviewed and scored by MASC.
- A standardized scoring system is used to determine the degree of independence of each applicant.
- Each of the five categories (land, management, storage, machinery, finances) receives a score that reflects the level of independence.
- The total score represents a fair, objective and consistent measure on which to base the decision of independence for insurance purposes.
- Scores within given ranges will lead to one of two outcomes:
- allow an independent contract, or
- require an amalgamation with one or more farm operations for insurance purposes, due to lack of independence.
- Landlord Contracts are issued to producers that farm on a crop-share basis. Producers applying for a Landlord Contract must provide MASC proof of a bona fide share agreement and proof of farm income such as a tax record or sales ticket.