4 ms·

They forgot economy of scale, but they also forgot to buy US subsidized crop insurance [1] to get a piece of the $14bn government handouts paid in a single year

• grogenaut 11y ago
  I worked on a crop insurance app for a while. Big insurance co's greatest frustration is that farmers could basically just sign up and be guaranteed not to take a loss due to anything except their own purposeful damage (even market price below a certain value). And it would cost them nothing. Only the smart farmers did. The rest were fearful they were going to get swindled. The smart ones used it like a hedge fund where they guaranteed a profit and were mainly betting profit rates on how much supply there was going to be. Insurance company was providing it at a very low cost as the govt sets the service charge over the coverage level. Insurance companies have to compete on how cheap they can make the offering to actually provide (good cheap IT, good cheap claims). Big insurance co I worked with did it just as part of their portfolio to make it easier to sell insurance on equipment and life insurance. Really odd setup but made sense as an alternate way to do farm subsidies if you thought about it. But farm subsidies pay you not to grow, this pays you to grow and guarantees a certain income if you control your other costs (maintenance, overhead, etc).