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A New Approach to Farm Insurance Risk Management Introducing The Ag Risk Management Projector™


As you know, there are many issues to consider when determining the appropriate annual insurance risk management strategy for your farm. But with so many risks and variables to consider, we all know the impact these can have on the viability of your operations. With multiple insurance programs available like AgriStability, AgriInsurance and of course those in the private sector . . . how do you make an effective decision? Do these programs even work? Or more importantly, how do you make them work best for you? MNP may have the answers you’ve been waiting for.

The Ag Risk Management Projector™ (ARMP) is a highly visual and interactive tool which gives producers a better understanding of the costs and benefits of the various insurance risk management programs and how they work for each producer’s specific operation and set of unique circumstances in a given year.  The ARMP helps producers choose the optimal mix of insurance risk management products to limit exposure to losses to an acceptable level. 

The ARMP uses the following data from a producer’s own farming operation to provide assistance, in the form of graphs, to determine which insurance program(s) that producer should include in their risk management strategy for the upcoming year:

  • Planned acres, estimated yields and estimated prices for each crop
  • Estimated production costs (fertilizer, seed, chemical, hail insurance and other)
  • Overall estimated livestock margin information (if any)
  • Previous year’s AgriStability margin information
  • Current year quotes for crop insurance and / or GARS

All of this is accomplished by modelling two side-by-side projected accrual income statements that show various scenarios from the producer’s planned or most probable outcome down to a zero crop scenario. These scenarios can be switched between production and price losses and various sensitivities for production, price, input costs and un-seedable acres.  All of the farm’s costs are reflected in the analyses, including depreciation, interest and non-arm’s length salaries, so the impact on overall farm profitability can be seen at all levels and factored into the decision-making process.

The ARMP was originally developed by MNP in response to three significant trends in the marketplace that made producers’ decision making around insurance risk management more difficult:

  • Significant changes in 2013 to 2017 AgriStability program parameters, which reduced government benefits
  • Evolution of crop insurance to include new types of coverage
  • Increasing availability of private sector risk management tools

MNP is the only accounting and business advisory firm in the marketplace with a tool like the ARMP™, which was developed to address these trends and to benefit the entire Ag industry, not just our existing client base.  In fact, the service delivery of the ARMP has been designed so it can be delivered on a stand-alone basis, meaning that producers who are not currently MNP clients can still benefit from using the tool without having to sever longstanding relationships with other accountants.

One of the biggest advantages of the ARMP is that it is independent, becoming increasingly important as more private sector insurance products enter the marketplace.  When you think of crop insurance and AgriStability, the two government subsidized version of insurance risk management programs currently available, those programs don’t rely on a sales force that must meet sales quotas or growth targets. The government organizations that deliver those programs across Canada generally make information available on the programs and then wait for producers to come to them to purchase the coverage.  If producers choose to purchase privat​e sector insurance rather than the government subsidized versions, the government administrations currently have no way of modelling how the various programs would compare for a specific farming operation or even in general. 
When you think of private sector insurance, on the other hand, the companies that deliver this insurance are profit-oriented and will deliver through a sales force that is quota or growth driven.  This may or may not lead to high pressure sales tactics, depending on the individual delivering the sales pitch. However, the general tendency will be to sell and to favour their own product over the other offerings in the marketplace, including government subsidized insurance.  After all, the more producers purchase their product, the more profit they make.

At MNP, we don’t sell or deliver any of the insurance risk management programs, which makes the work we do with the ARMP independent and unbiased.  Our role is to gather the necessary data, ensure it’s  entered correctly and model various scenarios to assist our clients in choosing an optimal insurance risk management strategy.  A picture is worth a thousand words and so we let the projected accrual income statement pictures do the talking and allow our clients to make better and more informed choices based on what the pictures are saying. Helping our clients achieve success in growing their business and creating something to pass on to the next generation is our underlying objective.  If our clients’ insurance risk management strategies leave them exposed to significant risks, we will have difficulty meeting that objective. 

For more information about MNP’s Ag Risk Management Projector, contact Steve Funk, CPA, CA, Director, Farm Income Programs at 403.380.1628 or [email protected]