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Matrix Report - How is the Insurance Payment Calculated?

Last Updated: Feb 27, 2019 04:33PM CST
If you purchase a government insurance program to protect your production (i.e. RP, RP (HPE), YP, ARP, AYP, APH etc.), the matrix is a handy tool to calculate when you may potentially receive an insurance indemnity payment depending on a price and/or yield change. The scenarios that may result in an indemnity payment are indicated with an orange umbrella on the matrix.


*Keep in mind, the matrix can only be run by commodity. If you have set up multiple profiles for each commodity, a matrix cannot be run by individual profile. Thus, if you have set up profiles for individual fields for a commodity, the matrix will allow you to run a report with rolled up view of the individual profiles. If different insurance products are used among your profiles for the same commodity, the matrix only allows for the selection of one insurance product.


This article will help explain how the insurance indemnity payment is calculated for each scenario. For a more general article regarding the matrix, please see the article linked here.


In this example, a corn profile with RP as the insurance product will be used to run a sample scenario. Keep in mind, each insurance product works differently and will have a different calculation.


 

1. Start by running a what-if matrix report in your GrainBridge account. Reports --> Matrix. Make selections and enter your unique insurance program information.

 
  • The projected price will automatically populate with the spring price once it's been established (after February). Prior to the spring price being established, a manually entered projected price can be entered as an estimate. Once all information has been entered, click the 'Run Report' button. 


 
  • By hovering your mouse over any of the cells in the matrix, a pop up window is displayed with the elements comprising the gain/loss displayed in the matrix.
 
  • If the cell has an orange umbrella, the popup window will contain a line item for a projected insurance payment.
 
  • The insurance payment listed is based on the yield and price associated with the chosen cell. 



2. Key information about the operation in the example:

 
  • 1,120 acres of corn
 
  • APH: 175
 
  • Insurance Coverage: RP, 80% coverage, projected price = $4.00



3. Scenario: Weather has been unfavorable throughout the growing season and the corn has been under stress. There is concern over a significant loss in yield. However, prices have risen slightly due to the weather uncertainty and are expected to be $.50 higher at harvest.

 
  • The matrix is being used to see how profitability will be impacted and what insurance indemnity payment can be expected if prices rally $.50 at harvest and yield falls to 137 bushels per acre (bpa) (40 bpa lower than expected). 
 
  • Looking at the matrix, an indemnity payment of $12.53/acre is estimated if the above scenario holds true.


 

4. The matrix shows a $12.53 payment can be expected with this scenario--how is this calculated?

 
  • RP protects revenue, and since this is not a harvest price exclusion revenue protection, the policy holder get's to use the spring price or harvest price (whichever is higher) to use for calculation of revenue to be protected.
 
  • Projected Price Guarantee of revenue protected by the insurance policy:
    • 175 bpa (APH) x $4.00 per bushel (projected price) = $700 per acre
    • $700 per acre x 80% coverage = $560 per acre
 
  • Harvest Price Guarantee of revenue protected by the insurance policy:
    • 175 bpa (APH) x $4.38 per bushel (harvest price) = $766.50 per acre
    •  $766.50 per acre x 80% coverage = $613.20 per acre
    • Since harvest price is higher, it is used to determine the revenue amount protected by insurance.
 
  • Scenario Revenue Calculation (if yield falls 40 bpa & prices rally $.50)
    • 137.14 bpa (actual yield at harvest) x $4.38 (harvest price) = $600.67 per acre
    • $613.20 (revenue insured) - $600.67 (actual revenue) = Indemnity Payment of $12.53 per acre 
039ef625f840fdbe8e648d84480efc9a@grain.desk-mail.com
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