Saturday, December 19, 2015

Insurance companies consolidate on crops

The United States politicians like insurance companies, so they let them handle medical and crop insurance.

The result is much higher administration costs in the United States than in Canada where governments are the single source of medical and crop insurance.

For medical services, administration accounts for one per cent of total costs in Canada and for 20 per cent in the United States. I don’t know the figures for crop insurance administration.

This explains in part why Zurich Insurance Group AG agreed to buy a Wells Fargo & Co. crop-insurance business for as much as $1.05 billion last week.

The purchase or Rural Community Insurance Services, or RCIS, will give Zurich a 20 percent share of the market.

It will provide about $1.6 billion in net earned premiums by 2017, adding 3.5 percent to Zurich’s top line, according to a market analyst.

Others who expanded their crop insurance business recently are HCC, which bought Producers Ag Insurance Group from CUNA Mutual Group and Farmers Mutual Hail Insurance Co. of Iowa bought Deere & Co.’s crop insurance unit.