New law requires farm mutual companies provide ‘adequate’ instead of unlimited coverage

It allows farm mutual companies to offer “adequate” coverage. Previously, the were only allowed to offer unlimited coverage.
Published: Nov. 20, 2023 at 6:24 PM CST
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SPRINGFIELD (WGEM) - A new Illinois law allows farm mutual insurance companies to offer capped insurance coverage.

Illinois Gov. JB Pritzker signed the bill into law on Nov. 17. It took effect immediately.

It allows farm mutual companies to offer “adequate” coverage. Previously, the were only allowed to offer unlimited coverage.

Illinois Farm Bureau Director of State Legislation Kevin Semlow said the old requirements became untenable for farm mutual companies.

“What is happened is those companies have to have reinvestments by other insurance companies, larger companies that do reinsurance,” Semlow said. “And those reinsurance companies said with that unlimited cap, we’re not going to offer reinsurance for those programs anymore.”

Farm mutual companies are typically small, local insurers. They often can’t afford catastrophic coverage without reinsurance from a larger corporation.

Under the new law, “adequate” coverage means enough to cover damage expected from a 500-year weather event.

“We’re talking a tornado out of the normal, a large windstorm that’s supposed to only happen once every 500 years it’s so large,” Semlow said. “We have storms and thunderstorms all the time. Those aren’t 500 ones. It’s those massive ones that come in and cause huge damage.”

He said the “adequate” coverage requirement brings Illinois in line with many nearby states.

Lawmakers gave the bill unanimous support as it went through the legislature.

State Sen. Neil Anderson, R-Moline, said without the new law, the nearly 51,000 farm mutual policy holders across Illinois would’ve been in trouble, which could’ve led to economic problems for everyone.

“Agriculture and agribusiness is the number-one economic driver in the state and a lot of that is farmers,” Anderson said. “If farmers lose their policies and they can’t be covered, they go belly-up, and if they go belly-up, we starve and the world starve.”

Semlow said without farm mutual companies, farmers still would’ve had catastrophic insurance options but only with large corporations. It would leave them with fewer choices in the marketplace.

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