New Video: Criticisms Against Farmers Who Purchase Crop Insurance Naïve, Untrue

(OVERLAND PARK, Kan.) — Critics who said that farmers who purchased crop insurance were “praying for drought, not praying for rain” or were “laughing all the way to the bank” during last summer’s historic drought were strongly rebuked by farmers, crop insurance agents and claims adjusters in a new video released today by National Crop Insurance Services (NCIS).

Marvin Andris, a farmer from Milford, Illinois, responded to Environmental Working Group’s accusations, noting that their comments underscored how little they know about farmers. “They obviously haven’t brushed shoulders with any farmer,” he said. Andris said he didn’t know a single farmer who farmed for an insurance check. “We’re into this because we want to raise crops, and the more bountiful, the more excited we become,” he said.

“I certainly don’t see anybody, as far as I know, that is seriously farming looking for a drought, and looking for a crop insurance check,” said Ben Hanawa, a field claims adjuster from San Benito, Texas. He explained that crop insurance can help you make it through a bad year, “but it certainly is no way to make a living.”

David Finch, a claims adjuster from Tulia, Texas, noted that charges that farmers are happy to incur losses demonstrated both a misunderstanding of the nature of farmers and how crop insurance works. “I’ve never heard of anybody or talked or visited with any farmer who would rather have an insurance check than he would have a good crop that he could bank on his own,” he said. “It’s a matter of pride.”

Robert Geddes, a farmer from Hoopeston, Illinois, explained that crop insurance is not any different than other forms of insurance that consumers buy on a daily basis, like homeowner’s insurance or car insurance. “You don’t buy insurance on your car with idea of going out and having a wreck,” he said. “It’s to take care of [you], when things truly go against you.”

Todd Harris, an insurance agent from Rossville, Illinois, explained that most of the farmers in that part of the state have never had a claim of this nature. “All you got to do is be a mathematician, really, to figure out if you’d be better with a claim, or a crop,” he said. Harris noted “if you ask that question of a farmer, they’ll laugh at you.” That’s because farmers make far more from a good crop than an insurance claim, he explained.

These were not the only misrepresentations farm policy critics made during last year’s historic drought. Claims were made that indemnity payments for the drought would range from $20 billion to $40 billion. The Congressional Budget Office noted earlier this month that 2012 indemnity payments will be closer to $16 billion.

Those same critics also led people to believe that taxpayers would be responsible for nearly all crop insurance payments to farmers, which is another fallacy. Final program costs will reflect the $4.1 billion in premiums farmers paid to purchase insurance policies, losses by private crop insurance companies, as well as government investment.

 ###

 

Despite Record Losses Crop Insurance Program Remains Strong: March 15 Sales Closing Deadline for Most Spring Crops

OVERLAND PARK, KAN – While 2012 crop insurance indemnity payments have hit a new record high, the taxpayer-funded portion of those losses will be much lower than crop insurance critics warned last summer.

That is good news for the future of the program and good news for farmers who are closing in on the March 15 deadline for signing up for crop insurance on most spring planted crops. March 15 is also the deadline to make any changes to existing policies.

The 2012 indemnities hit $14.7 billion, as of February25, and will climb higher as claims are finalized in the next few weeks.

There will be some government loss in the program for 2012 but it will be mitigated by the $4.1 billion in farmer paid premiums as well as losses absorbed by the participating insurance companies that deliver and service the crop insurance program.

The Congressional Budget Office foresees a sharp decline in indemnities in 2013 and has lowered its projections for total federal outlays for crop insurance by nearly $8 billion over the next 10 years.

All of this contributes to a sense of optimism over the future of the crop insurance program. After all, unlike many previous years of weather disasters, there were no calls for additional ad hoc disaster assistance.

Farmers will use their indemnities to recover from their loss and then plan for this year’s crop and that plan will no doubt include a careful review of their crop insurance options before the March 15 deadline.

 

###

 

Despite Record Losses Crop Insurance Program Remains Strong: March 15 Sales Closing Deadline for Most Spring Crops

OVERLAND PARK, KAN – While 2012 crop insurance indemnity payments have hit a new record high, the taxpayer-funded portion of those losses will be much lower than crop insurance critics warned last summer.

That is good news for the future of the program and good news for farmers who are closing in on the March 15 deadline for signing up for crop insurance on most spring planted crops. March 15 is also the deadline to make any changes to existing policies.

The 2012 indemnities hit $14.7 billion, as of February25, and will climb higher as claims are finalized in the next few weeks.

There will be some government loss in the program for 2012 but it will be mitigated by the $4.1 billion in farmer paid premiums as well as losses absorbed by the participating insurance companies that deliver and service the crop insurance program.

The Congressional Budget Office foresees a sharp decline in indemnities in 2013 and has lowered its projections for total federal outlays for crop insurance by nearly $8 billion over the next 10 years.

All of this contributes to a sense of optimism over the future of the crop insurance program. After all, unlike many previous years of weather disasters, there were no calls for additional ad hoc disaster assistance.

Farmers will use their indemnities to recover from their loss and then plan for this year’s crop and that plan will no doubt include a careful review of their crop insurance options before the March 15 deadline.

 

###

 

Growing Global Food Demand Underscores Importance of Crop Insurance

(INDIAN WELLS, Calif.) – Strong demand for U.S. commodities – driven primarily by the growing middle class in developing countries – will keep prices strong through the next decade, said Michael Dwyer, director of global policy analysis at USDA’s Foreign Agriculture Service. Dwyer made his comments yesterday during an annual conference sponsored by National Crop Insurance Services and the American Association of Crop Insurers.

Current commodity price and demand situations have been good for the rural economy as well as the federal budget, he explained. “The prosperity that American producers are realizing today is not coming at the expense of the American taxpayer,” he said, noting that farm policy spending is declining.

Dwyer’s remarks were the first of two presentations discussing global agriculture outlook. Former USDA chief economist Keith Collins moderated a panel discussion later in the day on various uncertainties facing agriculture, including economic and environmental factors.

Collins said that increased demand for food in the developing world will increase pressure on U.S. farmers to boost productivity, which will make yield-enhancing technology and risk-mitigation tools like crop insurance even more important in the future.

But keeping up with growing demand could be even more challenging given an unpredictable weather outlook, explained William Hohenstein, director of USDA’s Climate Change Program Office.

“Agriculture has been and will continue to be significantly affected by changes in climate conditions,” Hohenstein said, noting the USDA recently released a climate change effects and adaptation report. “There’s a lot of potential for the crop insurance program to help make farmers more resilient to [climate] change by addressing risk,” he continued.

###

 

2012 Crop Insurance Indemnities Set New Record, But Are Far Lower Than Critics Warned

(INDIAN WELLS, Calif.) — Crop insurance indemnity payments associated with the historic 2012 drought hit a record $14.2 billion Monday and will continue to climb as insurers work to finalize the remaining claims. But according to projections released last week by the Congressional Budget Office (CBO), total indemnities and the taxpayer-funded portion of those losses, will be much lower than crop insurance critics warned last summer.

CBO predicted $16 billion in expected indemnities as a result of last year’s catastrophic weather; however, CBO foresees a sharp decline in indemnities in 2013 with a return to more normal weather conditions. Since August, the CBO has lowered its projections for total federal outlays for crop insurance by nearly $8 billion over the next 10 years.

This stands in sharp contrast to the wild claims made last summer by crop insurance opponents who were angling to weaken farmers’ most important risk management tool. Academics and think tanks with an anti-farm-policy agenda supplied the media with sloppy estimates ranging from more than $20 billion to $40 billion in total indemnities.

Critics also led people to believe that taxpayers would be on the hook for nearly all crop insurance payments to farmers, which is another fallacy. Final program costs will reflect the $4.1 billion in premiums farmers paid to purchase insurance policies, losses by private crop insurance companies, as well as government investment.

The previous indemnity record of $10.8 billion was set to cover flooding in the Midwest and drought losses in the Southern Plains during 2011.

“The ability of the crop insurance industry to sustain back-to-back insured losses exceeding $10 billion, as it has done in 2011 and 2012, is a testament to the sound financial underpinning of the public-private partnership,” said Tom Zacharias, president of National Crop Insurance Services, a trade association representing crop insurers. “More importantly, unlike natural disasters before the emergence of crop insurance, all of the cost is not falling on the laps of taxpayers.”

Zacharias explained that before crop insurance became such an affordable and widely available tool, natural disasters like last year’s drought would have triggered costly ad hoc disaster bills, fully funded by taxpayers. Forty-two such agriculture disaster bills have cost taxpayers $70 billion since 1989, according to the Congressional Research Service.

“In addition to reducing taxpayer risk exposure, crop insurance receives high marks from those who buy it – our farmer customers – because of its efficiency and speed of delivery,” said Zacharias. “Farmers will use their indemnities to recover from their loss and then plan for next year’s crop,” he said.

By comparison, the recent Hurricane Sandy disaster assistance bill took three months to be signed into law. Relief payments to the victims, authorized by that legislation, have yet to be delivered.

###

Under Secretary Scuse Commends Crop Insurance Providers for a Job Well Done

(INDIAN WELLS, CALIF) – Last year’s drought put the country’s crop insurance system to the test, but the public-private partnership passed with flying colors, USDA Under Secretary Michael Scuse said today at the 2013 crop insurance annual conference.

During the disaster, Scuse traveled across rural America and gave farmers business cards with instruction to call if there were any problems or concerns about crop insurance or the speed of assistance delivery.

“To this day, I have yet to have a single producer call me with a complaint about crop insurance,” he said. “That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.”

Scuse noted that despite the volume of claims and acres covered, farmers received indemnity checks within 30 days of finalizing claims. “Meanwhile, all of this happens with RMA and [crop insurance] providers consistently operating at a very, very minor error rate,” he said, noting that America’s taxpayers are viewed as important stakeholders in the federal crop insurance program.

This success explains why Scuse noted other countries are looking to America’s crop insurance system as a model for their own farmers and ranchers.

Scuse noted that the USDA and the industry will continue to work together to offer new products for today’s ever emerging agricultural industry. “As agriculture grows and expands, the need for new and better products will continue,” he said, and “because of that we need to continue building on this great partnership that we have.”

“The risk to our farmers and ranchers continues to increase each and every year, and not just by the weather but by the increases in cost of production,” Scuse concluded. “We need to continue this partnership and working together… and make sure that the American citizens have the most abundant, safest and most cost-effective food supply to be found anywhere in the world.”

###

Farm Leaders Again Urge ‘Do No Harm’ to Crop Insurance; Reaffirm Crop Insurance as a ‘Top Priority’ in Farm Bill

(INDIAN WELLS, Calif.) — Echoing the same message heard throughout the halls of Congress last year, a panel of farm leaders urged Congress to “do no harm” to crop insurance in the upcoming Farm Bill and to remember that crop insurance is a top priority for most of America’s farmers.

Robbie Minnich,senior government relations representative with the National Cotton Council, pointed out that one of the key strengths of crop insurance is that farmers and agents sit down and draw up arisk management strategy tailored specifically for that farm. “Crop insurance policies come in a wide array of styles and coverage and the farmer can very closely tailor their policy to their specific farm situation and risk tolerance. It’s certainly not a ‘one-size-fits-all’ strategy,” he said.

“It is critically important that farm policy includes avenues for farmers and ranchers to manage the risk of bad yields and wild market swings,” said Mike Stranz, a government relations representative with National Farmers Union. “The current system of crop insurance has done a good job of that and must to continue to improve,” he added. “Crop insurance helps ensure that the nation’s food, feed, fiber and fuel supply remains stable and affordable.”

Brooke Shupe, manager of government affairs for risk management for the National Association of Wheat Growers, noted that crop insurance is critical in wheat country, particularly given the ongoing drought. “Crop insurance is a critical risk management tool for wheat producers. That’s why the vast majority of the nation’s wheat farmers purchase it every year,” she said.

Sam Willett, senior director of public policy at the National Corn Growers Association, said,“cuts in the crop insurance program would reduce the effectiveness of the most important risk-management tool farmers have. We can’t afford to dilute our best risk management tool.The federal crop insurance program’s performance this past year in protecting producers from financial disaster, especially younger farmers, explains why it is the most important risk management tool.”

Several of the panelists expressed concern that crop insurance could come under pressure as budget constraints tighten, which could harm both the participation levels and overall effectiveness of the program. “One of the keys to the success of crop insurance is the widespread participation by farmers,” noted Mary Kay Thatcher, senior director of congressional relations with the American Farm Bureau Federation.“If Congress does anything to reduce the level of participation, there could be a tremendous outcry for some sort of federal intervention the next time we have a widespread natural disaster,” she added.

Reece Langley, vice president of government affairs with the USA Rice Federation, pointed out that crop insurance and other farm policies have already taken budget cuts in the name of deficit reduction. “When making decisions in the upcoming Farm Bill, it should be remembered that agriculture has already sustained more than $12 billion in budget since 2008.” Langley noted, “USA Rice has been actively working in recent years to improve crop insurance so that it is more effective and affordable for rice producers, and we are encouraged by some recent steps taken by the Risk Management Agency. However, crop insurance cannot serve as the sole safety net for producers, especially with respect to multi-year price declines.”

Dennis Nuxoll, vice president of federal government affairs with Western Growers underscored the importance of crop insurance to his organization. “Crop insurance is already a critical management tool for many farmers. But for specialty crop farmers, the use of crop insurance products have not been as common,” he said. Nuxoll explained that the farmers he represents grow hundreds of different crop types under a huge variety of growing conditions. “Thus, there’s work ahead for us to tailor these products so they serve as the best, strategic risk management tools possible,” he said. “With ever-growing challenges, our growers are increasingly focusing on these products as tools they could use.”

###

Crop Insurance Wins High Praise from Farmer Leaders

(INDIAN WELLS, CALIF.) Farmer leaders from across the country yesterday called crop insurance their “most important risk management tool” and said it is essential to keep agriculture strong and bring young farmers into an aging business.

Curt Friesen, a member of the Nebraska Corn Board, said his son-in-law, who is currently a university teacher, is coming back to his fourth-generation farm. And given the capital requirements and risk associated with farming today, he said, a strong crop insurance policy will be the key to his son-in-law’s ability to succeed.

“He sees a future in agriculture,” Friesen noted. “I’m excited to bring him back but a little scared because I know times aren’t always going to be this good – crop insurance is going to be critical down the road for me to help him get started.”

Crop insurance helps highly leveraged beginning farmers qualify for financing, he told the group at the 2013 crop insurance industry conference. Mark Nichols, a cotton grower from Oklahoma agreed, adding it is important for growers of all ages.

“In our area, whether it’s a guy 25 years old trying to get into farming, or a guy like me in his 50s, it’s not a choice whether we have federal crop insurance,” Nichols said. “Our banks look at it as our main risk management tool.”

Bill Bridgeforth, chairman of the National Black Growers Council, knows first-hand why banks look to insurance as a way to protect a farmer’s investment. A fifth-generation farmer from Alabama, Bridgeforth told the group that he “has used crop insurance every year since 1980.”

“We’ve had some pretty good years, and we’ve had some years that, if it hadn’t been for crop insurance, we probably wouldn’t be in business today,” he explained.

“Friesen applauded crop insurers for the speed in which claims were processed following the historic 2012 drought. But crop insurance isn’t just about obtaining financing or surviving disaster, it is also a useful marketing tool, he noted.

“It allows me to market my crop better,” Friesen told the group. “I use it to set a [price] floor. It makes me a lot more comfortable using Chicago Board of Trade futures to market grain. I can market early, I can adjust my positions and I know I’ll have a backstop with crop insurance as my base.”

When asked during a question and answer session about critics attacking crop insurance, panelists were quick to defend the public-private partnership, noting its cost effectiveness and the lack of expensive taxpayer-funded ad hoc disaster legislation following the 2012 drought.

Bing Von Bergen, a Montana wheat farmer and director of the National Association of Wheat Growers, also explained that in good years the government makes underwriting gains on crop insurance because farmers pay premiums.

He criticized legislative attempts to reduce crop insurance participation by attaching arbitrary benefit caps, income limits and duplicative conservation compliance mandates to the program. Such attempts, he said, could wind up increasing premium rates for all farmers.

###

 

USDA Official: Crop Insurance Benefits All Americans

(Indian Wells, California) – “An investment in crop insurance is an investment in America’s economy,” Brandon Willis, the acting administrator to the USDA’s Risk Management Agency, said today at the 2013 crop insurance industry conference. He challenged the group of crop insurers and farm leaders to take that message to the general public, which he said, “benefits greatly from the crop insurance program.”

For example, Willis explained that agriculture is key to our nation’s future and that crop insurance underpins its success.

“If having a food supply is in our nation’s interest…we need the best and brightest to be engaged in agriculture, providing that food for us,” he explained. “Without crop insurance we will not get the best and brightest back on our farms.” The reason, he told the group, is because of the high risk and intensive capital involved in farming. Willis also noted that, thanks to agriculture, “American families pay less for food at the grocery store than people in any other nation.” And the sector is also a major employer, with more than 1 million U.S. jobs tied to agricultural exports alone.

In addition, Willis believes that crop insurance’s success during the historic drought of 2012 should be touted.

“The lack of calls for disaster assistance speaks volumes to the effectiveness of the crop insurance program,” he said, noting that prior to crop insurance’s rise in popularity taxpayers were footing the bill for billions in costly ad hoc disaster programs.

Since the last major drought in 1988, Willis said the amount of insurable farm acreage covered by insurance has risen from 25 percent to 85 percent for corn, soybeans and wheat, 80 percent for rice, and 90 percent for cotton.

Since just 1998, 100 million more acres are enrolled in crop insurance and protects 30 additional crops.

Industry Leaders Say Crop Insurance Remains Strong Despite Back to Back Losses; Praise Agents and Adjusters for Success of Program

(INDIAN WELLS, CALIF) – Farmers can rest assured that crop insurance is strong and vibrant and was designed to be able to endure the types of losses we’ve seen over the past several years, said the leaders of two key crop insurance organizations today during the joint national convention of the National Crop Insurance Services (NCIS) and the American Association of Crop Insurers (AACI).

“Hopefully, the rains that farmers have been praying for will come this spring. But if they don’t, then that’s why the federal crop insurance program is here,” said Steve Rutledge, NCIS chairman, during his opening remarks. Rutledge pointed out that farmers paid $4.1 billion out of their own pockets for the protection of crop insurance in 2012. “One of the reasons why this public-private partnership works so well is that those who seek protection must first put ‘skin in the game,’” he said.

Rutledge noted that while farmers were possibly facing three bad years in a row, the federal crop insurance program has been around since 1938 and farmers should know that when they purchase a policy and suffer a loss, their indemnity is something they can count on. “One of the many reasons why farmers love crop insurance is because when disasters strikes – and that happens all too frequently in farming – help is there quickly,” he said.

Sharing the stage with Rutledge was Greg Deal, chairman of AACI. Deal called the 15,000 crop insurance agents and 5,000 claims adjusters “the unsung heroes” of the industry, because they work directly with farmers to ensure that crop insurance is fast, accurate and efficient. “The agents, who are often farmers themselves, understand the risks involved in farming and how unnerving a bad crop year can be,” he said.

Deal explained that the recent drought really put the adjusters’ “feet to the fire,” necessitating long work days, often including weekends. “In 2012, more than 436,000 policies were indemnified, a number that clearly demonstrates the workload bore by our adjusters,” he said.

With drought conditions expected to continue in 2013 and farm policy getting added attention in the halls of Congress, this year will likely be as busy for the industry, Deal explained.

“What we’ve heard from almost every commodity group and farm organization is “Do No Harm” to crop insurance. This program is a three-way partnership between the general public, the farmer and the private sector, and all three benefit from their investment,” said Deal. “Crop insurance is the risk management tool of preference – and for some the only risk management tool available – to the vast majority of America’s farmers.”

Deal added that the farm safety net, namely crop insurance, underpins the agricultural sector that not only generates a dependable supply of food but is helping drive the U.S. economy – all for less than one-quarter of one percent of the federal budget.

That, concluded, Rutledge, is why farmers see crop insurance as the “number one risk management tool in their arsenals.”

Max Erickson Presented Crop Insurance Industry Outstanding Service Award

Max Erickson, Erickson Insurance Group, Havre, Montana, is the recipient of the 2013 Crop Insurance Industry Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Steve Rutledge, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2013 Crop Insurance Industry Annual Convention.

Following graduation from Montana State University, Max worked for the Montana Fish, Wildlife and Parks department doing research in the Yellowstone Valley of Montana. Shortly thereafter Max decided to make a career move and went to work in the insurance business as an agent for Farm Bureau. In the winter of 1980 he moved to Havre in North Central Montana.

While Max was switching gears in his own career and starting to learn the insurance business, Federal Crop Insurance was going through its own changes with the Federal Crop Insurance Act of 1980 and the formation of the long standing public-private delivery system we have today. With his move to Havre, Max was now at the forefront of a brand new opportunity and was literally in the center of one of the largest wheat producing areas in the entire nation, known around the world as the “Golden Triangle.”

Max spent those early years of crop insurance working with the pioneers of the industry and building a strong successful customer base, many of whom he still serves today. In 1983, Max decided to leave Farm Bureau and formed a multi-line independent insurance agency with E.J. “Bud” Baldwin called Erickson-Baldwin Insurance Associates located in Havre. The agency grew to be a very successful partnership spanning more than 25 years. In 2010, Max formed his own independent agency, Erickson Insurance Group.

Over his now more than 30 years of selling and servicing crop insurance in an industry dominated by white male farmers, Max has had the opportunity to cultivate a lasting business relationship with a number of producers who don’t fit that profile, including Native Americans, women and a religious sect known as Hutterites. In fact of the more than 90 policies serviced currently by his agency, 25 percent represent one of these groups. Max actively markets his agency to these groups and their unique circumstances, particularly the Hutterite Colonies, by helping them to understand their coverage better and making sure their policy fits their needs appropriately.

Max continues to work every day to help his clients learn to diversify and effectively manage their agricultural risks and looks forward to a long future in this very successful industry that has come to be the envy of the world.

Max was nominated for the award by Rain and Hail LLC, Johnston, Iowa.

Photo Caption: (left to right) Steve Wedel, Rain and Hail LLC, Max Erickson, and Tom Zacharias, National Crop Insurance Services.

Larry Heitman Presented Crop Insurance Industry Leadership Award

Larry Heitman, NAU Country, was presented with the 2013 Crop Insurance Industry Leadership Award at the 2013 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership.

Larry is Senior Vice President for NAU Country’s Western Branch office. Larry began his career in crop insurance industry as an hourly wheat adjuster in the drought of 1976 for the Federal Crop Insurance Corporation (FCIC). Within two years was he promoted from an adjuster to a sales supervisor and then to a regional training manager.

In 1979, Larry moved to Washington D.C. to work for Jim Deal who at that time was manager of the FCIC. During this time the crop insurance legislation was moving through Congress and eventually passed as the Federal Crop Insurance Act of 1980. This Act allowed the private insurance sector to begin participating in the MPCI program.

In 1982, Larry traveled back to California with the FCIC to begin helping agents sell MPCI policies. By fall of 1982 Larry decided it was time for a move so he opened the first MPCI company branch office in California, which became the largest writer in that state. At that time there were not any standardized procedures for California crops so Larry dove in and took it upon himself to write and implement them. He used old fashion printing techniques and convinced agents to move from FCIC policies to his own private company. His main selling point to agents was that he could pay claims faster. In 1988, Larry went back to work for Jim Deal and National Ag Underwriters (currently RCIS). Larry had to convince these same agents to move their policies to National Ag and 90 percent of them moved with Larry! In 1999 he accepted his current position with NAU Country, opening the NAU Western Branch in Woodland, California. Since then he has also lead the opening of a regional office in Fresno, California.

Over the years Larry has demonstrated true leadership in developing crop insurance processes and procedures throughout California. He has consistently recognized the unique diversity in California’s agriculture from that of the traditional crop insurance products. Larry has worked with agricultural groups, agencies, lenders and individual growers to develop products and innovative ways to address the needs of California agriculture.

Photo Caption: (left to right) Greg Deal, NAU Country, Larry Heitman, Tom Zacharias, President, National Crop Insurance Services.

Greg Burger Presented Crop Insurance Industry Lifetime Achievement Award

Greg Burger, NAU Country (retired), was presented with a 2013 Crop Insurance Industry Lifetime Achievement Award at the 2013 Crop Insurance Industry Annual Convention.

Greg Burger’s first job in 1964 was a contract adjuster, at the young age of 17. He continued in this role for 13 years when, in 1977, he became a full-time employee of North Central Crop Hail (NCCH) as the Office Manager in Eau Claire.

In 1979 and 1980 NCCH started working with FCIC led by Jim Deal to develop the present MPCI program. NCCH was against it at first because it felt that the government should not interfere with the private sector. As time evolved its position changed and in 1981 they entered the MPCI business.

One of Greg’s first duties for the Industry was to serve on a subcommittee for National Crop Insurance Association (NCIA), predecessor to NCIS, to rewrite the FCIC loss instructions and forms in an Industry format. One of the first committees he served on was the Research & Development Committee of the Crop Hail Insurance Actuarial Association (CHIAA), another predecessor to NCIS, which analyzed crop hail rating and underwriting forms.

Greg became a member of the NCIS Board of Directors in February 1989, representing North Central Crop Insurance. During his tenure he served as both Chairman and Vice-Chairman and dedicated much time and effort to ensuring the “voice of crop insurance” was well represented in Congress and throughout the Industry.

Greg later joined the staff of NAU Country and was proud to be part of its growth.

Photo Caption: (left to right) Greg Deal, NAU Country, Greg Burger, Tom Zacharias, President, National Crop Insurance Services.

James Deal Presented Crop Insurance Industry Lifetime Achievement Award

James Deal, NAU Country (retired), was presented with a 2013 Crop Insurance Industry Lifetime Achievement Award at the 2013 Crop Insurance Industry Annual Convention.

James (Jim) Deal was the former owner and Chairman of the Board of NAU, Mountain States and NAU Country Insurance companies. He was also the former owner and Chairman of a national managing general agency – NAU Underwriters. Mr. Deal was appointment by former President Jimmy Carter as Administrator for the Federal Crop Insurance Corporation from 1977 through 1980. Presently, he and his wife, Pam, are the owners of PSD Holding, LLC and its subsidiaries which are land development companies. Over the years he has been involved in numerous other ventures which included real estate development; business investments; farming; recreational vehicle retail sales; travel services; and, resort, restaurant and fishing facility operations.

Mr. Deal was appointed by Minnesota Attorney General, Lori Swanson, and currently serves as Treasurer of ClearWay Minnesota, a non-profit corporation that administers investment and grants tied to the 1998 tobacco settlement. Jim was also appointed by Governor Dayton to serve on two Boards: the Metropolitan Airports Commission (MAC) Board; and the Great MSP Board. Jim also serves on the ACHIEVE Services Board. ACHIEVE Services is an organization that creates innovative opportunities that inspire people with disabilities to lead a meaningful and self-determining life. He previously served as a board member on the Anoka Ramsey Community College Foundation and on the primary fundraising arm of the Mercy Hospital Foundation. Jim was also active in fundraising for the St. Paul Archdiocese and St. Stephens Church in Anoka, Minnesota.

Jim and Pam have lived in Andover (Minnesota) for over 20 years. They have six children, 19 grandchildren and 22 great-grandchildren. In his spare time he enjoys hunting at his Mora retreat, fishing in Alaska, gardening and golfing. Jim and Pam also enjoy spending time at their lake home in Alexandria and their winters at their home in Florida.

 

Photo Caption: (left to right) Greg Deal, NAU Country, Jim Deal, and Tom Zacharias, President, National Crop Insurance Services.

 

New Crop Insurance Activism Website & Video on Adjusters’ Role in Getting Help to Farmers

(Overland Park, Kan.) — With the fate of the 2012 Farm Bill still in question and the worst drought in decades fresh in people’s minds, the Crop Insurance Industry is announcing a new website that will serve as a focal point for groups to show their support for crop insurance.

“Crop insurance has grown to become the most important tool farmers and ranchers have to manage risk,” noted Tom Zacharias, NCIS president. “As the Farm Bill continues to be discussed, there’s no better time than the present to show your support for this critical risk management tool,” he said.

The website (www.SupportCropInsurance.org) will serve as a platform allowing organizations, farmers, agents, small businesses and others to sign an open letter to Congress in support of crop insurance. The letter is similar to one that was sent to Congress earlier this summer from major farm and commodity organizations.

Support for crop insurance is especially strong in rural America after this historic drought. A new video released today by NCIS focuses on the overall training and role adjusters play in getting crop insurance claims processed efficiently and accurately. Adjusters have already processed more than 137,000 claims so far this year, resulting in more than $2 billion worth of indemnity payments reaching farmers in need.

“Crop insurance is a safety net, just like buying insurance for your house,” said David Finch, a claims adjuster from Tulia, Texas, in the video. “It may burn down some day and it may not,” he explained. “But if you don’t buy crop insurance, you better have a good banker.”

 

-###-

 

New video offers insight into dramatic losses in the Heartland

OVERLAND PARK, KAN. — With the vast majority of the U.S. corn, cotton, soybean and sorghum crops yet to be harvested, crop insurance companies have already paid out nearly $2 billion in indemnities to farmers who have suffered losses this year.

“America’s heartland has taken a beating from Mother Nature and the crop insurance industry is committed to servicing the nation’s farmers and getting indemnity payments into the hands of policyholders as quickly as possible,” said Tom Zacharias, president of National Crop Insurance Services (NCIS). Zacharias noted that the industry’s 5,000 claims adjusters are working day and night to expedite claims for farmers who have suffered from this year’s drought.

A new NCIS video offers unique insight into the direct impact of the drought, featuring testimonials from farmers and crop insurance agents who discuss the heartbreaking destruction and losses they have witnessed this year. “Going out in the fields this year is a thoroughly depressing experience,” said David Andris, a farmer from Milford, Illinois. Andris described the disappointment of spending significant time and resources to get a crop into the ground and manage it over the growing season only to see if fail. “It’s like digging a hole and then filling it in,” he said.

Illinois Crop insurance agent Todd Harris explained that most of the farmers in his area have never had a claim. He said that while a crop insurance indemnity offers some peace of mind, it never compares to the financial benefit of a good harvest. “These folks take a substantial hit when they have to turn in a claim,” he said.

“We have heard from farmers who live in parts of the country where losses tend to be more common, and farmers who live where losses rarely occur,” said Zacharias. “What they all have in common is that crop insurance gives them peace of mind to cope with the drought, but also gives them the guarantee for a chance to farm again next year.

 

-###-

 

Crop insurers call on farmers to demonstrate severity of drought in online photo contest

OVERLAND PARK. KANSAS (August 20, 2012)—National Crop Insurance Services (NCIS) announced that it will host a 90-day photo contest, beginning today and featuring farm photos taken during the 2012 drought—on track to be one of the driest years the nation has ever seen.

The group is reaching out to all farmers suffering from these near-record drought conditions throughout the Midwest and Southwest and asking them to submit photos portraying the severity of the consequences these unpredictable weather conditions can impose on our nation’s farm families.

Uploading will begin on August 20, and submissions will be accepted through 12:00 AM EST, on Friday, September 21.

Once the submissions are in, visitors will be able to vote on the photos from September 22 through November 21. At the close of the contest, the top three photos will be ranked and awarded prizes, the first of which will be a new iPad.

Interested parties should follow Crop Insurance Keeps America Growing on Twitter and Facebook to stay up-to-date with the contest’s progress. To view the official contest rules, please click here.

 ###

Crop Insurers Reassure Farmers as Drought Worsens

OVERLAND PARK, KANSAS, July 18, 2012 – As the drought spreads and attention turns to worsening crop conditions in farm country, the nation’s crop insurers today reassured farmers that companies will have the money necessary to quickly pay out claims in 2012, even amid record payouts last year.

For every dollar of premium that insurance companies write, they have a regulatory requirement to have the private financial backing to cover catastrophic losses. Each year, the Federal Crop Insurance Corporation reviews and approves every company’s plan of operations to ensure that adequate capital is available, explained Tom Zacharias, president of National Crop Insurance Services (NCIS), the industry’s trade association.

“We’ve always been there for our farmer customers when they’ve faced tough times in the past and we’ll continue to be there,” he said.

Zacharias said 2011, which was marked by widespread weather-related loss and a record $11 billion in indemnity payments, should serve as a good model for what farmers can expect this year.

In 2011, most payments to farmers on the policies they purchased were processed within 30 days of claims being finalized. Such efficiency required a highly trained and skilled force of agents and claims adjusters, Zacharias pointed out.

There are about 5,000 certified crop insurance adjusters in the country who are already visiting farms and assessing damage. More than 2,000 of these adjusters are expected to attend NCIS sponsored training sessions this summer where part of the focus will be on this year’s droughts.

Although indemnity payments on the 2012 crop are already being made, NCIS is unable to predict the extent of likely damages this year because reliable information about the number of policies sold in 2012 and the acres covered by those policies will not be available until mid-August. Final indemnity estimates will take even longer to filter in.

In the meantime, Zacharias offered advice for farmers who are facing weather disaster. If producers think they have a loss on an insured crop, they must:

1. notify their crop insurance agent within 72 hours of the initial discovery of damage;

2. continue to care for the crop and protect it against further damage, if possible; and,

3. obtain consent from the insurance company prior to destroying any of the insured crop.

“Crop insurance is working well, and it will prove to be instrumental to agriculture’s ability to rebound this year,” Zacharias concluded. “As Congress debates a new Farm Bill and as the administration considers future changes, we hope they will see our impressive track record and do no harm to crop insurance.”

# # #

 

NCIS Unveils Third in Video Series, Spotlight On Historic Midwest Flooding

(OVERLAND PARK, Kan.) — As the House Agriculture Committee wraps up its hearings and the Senate Farm Bill moves closer to the floor for debate, National Crop Insurance Services (NCIS) today released the third in an ongoing series of educational videos on crop insurance. This new video spotlights the Missouri river flooding of 2011 – a months-long flooding event – that brought historic damage and destruction to farms in several states.

The video, titled “2011 Midwest Case Study,” contains an overview of the record flooding by NCIS President Tom Zacharias, highlighting the extended duration of the flood and the destruction it inflicted to America’s breadbasket. Additionally, Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, who had several clients whose farms were totally destroyed, gives some insight into the human side of the event and explains how farmers were able to bounce back and resume crop production the next year.

Ruth Gerdes described 2011 as a “year that I will never forget,” describing how she felt watching grain bins being crushed “like aluminum cans” as the waters overwhelmed the levees and crushed everything in their path. Gerdes explained that she had 39 clients who not only lost their crops, but their homes, their farmsteads and their grain bins. “One of the most exciting things for me was having those farmers on the coverage that allowed them to survive,” she said, noting that farmers who lost their crops in the flooding often had their indemnity payments in hand within two weeks.

Gerdes explained that what really amazed her was that after observing firsthand the record damage of 2011, to see farmers she knew return to the same fields today and see the tremendous effort those farmers had made to restore that land to the best shape possible. “Strong crop insurance is what has allowed those farmers to do all of the conservation needed in order for us to plant a crop in 2012,” she said.

2011 crop insurance indemnities have surpassed $10.7 billion and continue to rise. Zacharias noted that “testimonials like the ones in this video series provide undeniable evidence that crop insurance is a public-private partnership that not only helps farmers get back on their feet but also shoulders taxpayers from the burdens of natural disasters.”

 

###

 

House Subcommittee on General Farm Commodities and Risk Management Told ‘Outstanding Success Story’ of Crop Insurance

(WASHINGTON) — Crop insurance has become the powerful risk management tool that Congress designed it to be, garnering widespread support from all segments of agriculture, banking and most importantly, farmers, said Ruth Gerdes during her testimony today to the House Subcommittee on General Farm Commodities and Risk Management.

“The growth of Federal Crop Insurance is an outstanding success story,” said Gerdes, president of The Auburn Agency Crop Insurance Inc., farmer and crop insurance agent from Auburn, Nebraska. Gerdes explained that from the time the modern public/private partnership was forged in 1980, the program has grown “from an insignificant nuisance among farm programs covering less than 12 percent of the nation’s cropland to a robust program covering 83 percent of all cropland acres and providing bankable protection to America’s best, most dynamic and most productive farm families.”

Former USDA Chief Economist Keith Collins told the subcommittee that “the expanding role of crop insurance in the farm safety net signals several key features that farmers and policymakers find attractive.” Collins explained that these include the requirement that a producer has to consciously elect to manage risks, the availability of insurance plans that can be designed to fit individual farm risks, the idea that producers share in the program costs, and accountability that comes with cost sharing.

“In addition, the private sector delivers the program as part of a public/private partnership that involves risk sharing between the government and the private companies,” he said.

It was a good thing for taxpayers and famers that crop insurance was so effective, given the level of loss experienced by farmers last year. Tim Weber, president of Great American Insurance Company’s crop division, told the subcommittee that the fact that farmers are in their fields today is proof certain that crop insurance is the risk management tool that Congress envisioned.

“The 2011 crop year, one of the most destructive weather years in recent history, taught us that crop insurance is absolutely critical,” said Weber. “With large farm losses and record-high indemnity payments, farmers who might otherwise be out of business are back in the fields for the 2012 crop year,” he said.

 -###-

 

NCIS Unveils Second in Video Series, Spotlight On Texas Drought

(OVERLAND PARK, Kan.) — As the House Agriculture Subcommittee on General Farm Commodities and Risk Management prepares to hold a hearing later this week, National Crop Insurance Services (NCIS) today released the second in an ongoing series of educational videos on crop insurance. This video puts a sharp focus on the risk that Texas farmers – who received roughly one-quarter of all indemnities in 2011 – faced in last year’s historic and ongoing drought.

The video, titled “2011 Southwest Case Study,” contains an overview of the catastrophic drought by NCIS President Tom Zacharias, highlighting the extent of the damage throughout the state and the role crop insurance played in mitigating that damage. Additionally, two Texans were interviewed to better explain farmers’ ability to survive the drought and bounce back to plant again in 2012.

Rick Boyd, a banker with First United Bank in Lubbock, explains that many banks require farmers to purchase crop insurance to secure their loans. Boyd noted that if it wasn’t for crop insurance, any Texas farmers might not be back in their fields planting again this year. “2011 was such that, with the insurance, we did not have any farmers that actually went out of business, and over 90 percent of our customers had to draw on their insurance claims,” he said. “The programs were in place that allowed them, not to make a profit, but to actually get a lot of their expense money back and that was enough to enable them to get financing for the upcoming year,” he added.

Texas farmer and rancher Matt Huie notes that while 2011 started out hopeful, his crops and pastures eventually withered away and he was eventually forced to import hay from out of state to feed his cattle. “What we learned from the drought of 2011 is that good policy can create survivors in an industry that otherwise would have no survivors,” he adds.

2011 crop insurance indemnities have surpassed $10.7 billion and continue to rise. “The fact that there has not been a single call for disaster assistance from farmers – despite the fact that we just endured one of the worst weather years in history – is proof perfect that crop insurance is a smart, cost effective policy for taxpayers and critical risk management tool for farmers,” said Zacharias.

To watch the video, please visit: http://youtu.be/0bU_WNTEVks.

###

 

NCIS Unveils First in Series of Videos On Nuts and Bolts of Crop Insurance

(OVERLAND PARK, Kan.) — National Crop Insurance Services (NCIS) today released a new educational video on crop insurance – what it is, how it works and why it has become the risk management tool of choice for America’s farmers. The video, titled “Crop Insurance 101,” is the first in a series that will be released over the next few months.

The video is being released as the Senate Agriculture Committee is scheduled tomorrow to draft a Farm Bill. “Crop insurance is at the forefront of modern-day farm policy,” said Tom Zacharias, NCIS president. “For the vast majority of Americans who have very little to do with agriculture, this video could be their introduction to crop insurance,” he said.

Zacharias noted that it is important for the public to fully understand how the agricultural sector was able to bounce back from the most destructive weather year in modern history – with farmers receiving $10.6 billion in indemnities for the policies they had purchased – and are back in their fields this spring, planting food feed, fiber and fuel crops for consumers across the country.

In the first video, Zacharias explains that crop insurance has evolved as a way to limit taxpayer risk exposure by shifting it to private business. Other videos detailing the importance of crop insurance to agriculture and the role it has played in mitigating the long term damage to farmers and their livelihoods caused by natural disasters will be released in the future, complementing the existing video.

“Today’s popular crop insurance system has proven time and time again to be the most efficient way to deliver assistance to farmers quickly after a disaster to help them recover,” said Zacharias. “Best of all, the public-private partnership has been lauded from all major farm groups, elected officials, and most importantly, farmers themselves.”

To watch the new video, which only lasts a few minutes, click here: http://www.youtube.com/watch?v=TixSJuOh6YM

 ###

 

Crop Insurance Leader Urges Congress to Do No Harm


FOR IMMEDIATE RELEASE
March 15, 2012

(WASHINGTON) — “How crop insurance emerges from the 2012 Farm Bill process will hold major ramifications for this risk management program and for America’s farmers and ranchers who have come to rely on it,” Steve Rutledge today told the Senate Committee on Agriculture, Nutrition and Forestry.

Rutledge, who spoke on behalf of crop insurance companies, underscored the public- private partnership that is unique to crop insurance and how that relationship lowers risk for taxpayers. The chairman of Farmers Mutual Hail Insurance Company of Iowa also asked lawmakers to do no harm to crop insurance with additional funding reductions or regulatory burdens in the ongoing legislative debate.

Today’s testimony comes on the heels of record indemnities being paid out by crop insurers to farmers and ranchers recouping from the worst weather year in history. “The fact that the United States is planting crops just months after such devastation in 2011 should not be taken for granted,” he testified, noting the importance of a vibrant agricultural sector to the larger U.S. economy.

“I can’t tell you how many times I have seen the relief and gratitude on a farmer’s face when they realize that because of crop insurance, they will be back in the fields in the spring and life will go on uninterrupted,” explained Rutledge, who began his career as an insurance adjuster.

But this success could be upended if the crop insurance infrastructure is strained, Rutledge said. He explained that in the midst of the growth of crop insurance and the rising crop prices—both of which increase the cost of the policy and company risk—cropinsurance has lost about $12 billion in funding since 2008, making it one of the only sectors to sacrifice for deficit reduction.

“This reduction is astounding when one considers that crop insurance represented only 8 percent of farm bill spending and a meager one-tenth of one percent of overall government outlays,” he said.

Rutledge’s testimony concluded: “We firmly believe that crop insurance should remain the core risk management tool, and we are committed to the public-private partnership of program delivery, which directly supports more than 20,000 private sector jobs across the country. The private sector should continue to provide and deliver crop insurance options, share in the risk of loss caused by changing markets and natural disasters, and adjust losses for insurable crops. We believe the private sector, not the government, is the best way to provide the individual risk management information and tools that are indispensible for producers today. We understand that is the way farmers and ranchers want the program to operate, and trust in our congressional leaders to stay the course.”

Crop insurance companies wrote more than $11.9 billion in federal multiple peril crop insurance premiums last year, covering nearly 265 million acres of farmland, protecting more than 80 percent of eligible crops, with total potential liability exceeding $113 billion.

###

Crop Insurance Claims Break $10 Billion Barrier, Farmers Gear Up for 2012 Planting


FOR IMMEDIATE RELEASE
February 27, 2012

(OVERLAND PARK, Kan.) — For the first time in history, crop insurance indemnities to farmers and ranchers have exceeded $10.08 billion to cover agricultural losses, underscoring last year’s high crop values and volatile weather. This figure will likely climb as more than an estimated five percent of the claims remain outstanding. This surpasses the old 2008 record of $8.67 billion by more than 16 percent.

“The ability of U.S. agriculture to sustain more than $10 billion in insured losses and seamlessly finance itself for the 2012 crop season should not be taken for granted,” said Tom Zacharias, president of National Crop Insurance Services.

Zacharias said crop insurance’s popularity is high among farmers and lawmakers, and he thinks the system is working just as elected officials and agricultural leaders envisioned.

“Over the past 30 years, Congress and Administration officials have helped shape a public-private partnership that makes policies affordable and readily available, while speeding relief to growers through efficient private-sector delivery,” he said. “This is a testament to not only private industry but to USDA and the staff of the Risk Management Agency (RMA).”

This system, Zacharias noted, was specifically created to shift a significant portion of taxpayer risk exposure to private insurers. The fact that there were no calls for expensive taxpayer-funded ad hoc disaster bills following such a catastrophic growing season proves how well things are working. “In addition to helping to shield taxpayers from the full burden of an agricultural disaster, like the one we had last year, crop insurance has also received high marks from farmers for the speed and efficiency of its private sector delivery system,” Zacharias added.

Since 2008, a total of more than $28 billion has been sent to farmers for policies they purchased. Federal investment in crop insurance, during that same period, was reduced by more than $12 billion.

###

Miss America 2011 Brings National Focus to Crop Insurance Industry


FOR IMMEDIATE RELEASE
February 14, 2012

(SCOTTSDALE, Ariz.) — Commenting that while her reign as Miss America has ended, her passion for agriculture continues on, Miss America 2011, Teresa Scanlan, addressed the annual meeting of the crop insurance industry today and assured attendees that her heart still remains in rural America.

“This is one of my first appearances ‘post-crown,’ and I have to say, it’s so nice to feel like I’m still a part of the farming community,” Scanlan told the group. “Agriculture really has been one of my favorite groups to work with… I mean, why else would I agree to spend Valentine’s Day with you?”

Scanlan became a favorite daughter of rural America when she made defense of modern- day agriculture one of her public platforms. Raised in Gering, Neb., Scanlan told the group she knows how important agriculture is to this country’s economy and security, and how devastating natural disasters can be to farming communities.

Scanlan, who did not grow up on a farm, said she learned a lot amount about crop insurance this past year while traveling the country, meeting with farmers and lawmakers.

“The fact that growers will be able to plant again this year after the record floods, droughts and freezes of last year shouldn’t be taken for granted,” she said.

As for the ongoing Farm Bill discussions, she gave some perspective about where she thinks agriculture and crop insurance should fit into tight federal budgets.

“I may not know much about the federal budget, but I do know that in my family, food is the first priority, and the last thing that would ever be cut from our budget,” she said.

“And if American families think that way, shouldn’t the American government take that into consideration?” NCIS is a not-for-profit trade association whose members include every crop insurance company that participates in the Federal crop insurance program. NCIS and its predecessor organizations have provided members support in their crop insurance businesses since 1915. NCIS is also a licensed advisory organization and statistical agent for the crop insurance industry and assists the industry in meeting its state regulatory requirements.

###

After Successful 2011, What’s Next for Crop Insurance?


FOR IMMEDIATE RELEASE
February 13, 2012

(SCOTTSDALE, Ariz.) — With a record $9.7 billion in indemnities already paid out on 2011 damages, and farmers preparing to plant another impressive crop just months after one of the worst weather years in U.S. history, the current crop insurance system is earning high praise from agricultural leaders and lawmakers alike.

But in a new peer-reviewed analysis that appeared in January’s Choices magazine, former USDA Chief Economist Keith Collins and Harun Bulut, National Crop Insurance Services (NCIS) senior economist, explained that many proposals to alter crop insurance policy in the 2012 Farm Bill could hold serious ramifications for farmers and taxpayers, and could weaken the very system that proved so crucial last year.

Among the shortfalls they highlighted: Displacing private-sector crop insurance with duplicative government-run programs; saddling farmers and taxpayers with greater risk exposure; increasing program complexity; increasing taxpayer cost; and reducing farmer participation and coverage levels.

“With deficit reduction in prospect for years to come and insurance so fundamental to risk management in all economic areas, the long-term most sustainable safety net program for farmers may be enhanced crop insurance,” the authors wrote.

Collins, who attended an annual convention sponsored by NCIS, urged people to consider the past and present before writing the future.

“Let’s not lose sight of the fact that the current system took three decades to build and is working as designed,” he said at the conference. “The public-private partnership was created to reduce taxpayer risk by encouraging farmers to purchase insurance from professionals skilled in delivering private-sector payments quickly.”

Since modern-day crop insurance was first created in 1980, participation and coverage levels have grown dramatically. Nearly 265 million acres were insured by $114 billion worth of liability coverage in 2011, up from 45 million acres and $6 billion in coverage in 1981.

“My advice moving forward: Consider all consequences before restructuring crop insurance. The unintended consequences could harm three decades of success and upend some of the essential strengths that make the current system so great for farmers and taxpayers,” Collins concluded at the meeting.

###

2011 Indemnity Payments Eclipse $9 billion, Set New Record


FOR IMMEDIATE RELEASE
January 24, 2012

(Overland Park, Kansas, January 24, 2012) For the first time in history, indemnity payments surpassed the $9 billion mark, National Crop Insurance Services (NCIS) said today, noting that payments made to farmers for damages to the 2011 crop would continue to climb.

From historic droughts in the Plains to flooding along the Mississippi River and deep freezes in the South, growers faced unparalleled challenges in 2011 and crop insurance reached record amounts. The record of $9.1 billion could surpass $10 billion as the remaining claims are settled, NCIS noted. The previous record of $8.67 billion was set in 2008.

“Thanks to the foresight of Congress, crop insurance has been in place to weather enormous natural disasters and help ensure that farmers survive to plant yet another year,” said Tom Zacharias, president of NCIS. “Those billions in damages would have landed on the plates of input suppliers, lenders, marketers and farm families if crop insurance wasn’t in place,” he said.

Since 2008, more than $27 billion private sector dollars from crop insurance companies have gone back into the hands of farmers across the country for policies they purchased. Zacharias noted that during that same period, crop insurance has shouldered more than $12 billion in cuts in Federal investment even while exposure to risk has continued to rise.

“Two out of the last four years have seen the largest indemnity payments in history, all while the crop insurance industry was asked to do more with less,” said Zacharias.“The industry has become leaner and more efficient as it continues to serve the risk management needs of U.S. farmers,” he said.

“Faced with decreasing federal funding, record payouts and high crop values, it is imperative that Congress not weaken the crop insurance infrastructure further as it writes the 2012 Farm Bill,” he added.

###

NCIS serves as the crop insurance industry’s primary trade association and represents every company that participates in the Federal crop insurance program. While the group does not lobby for its members, NCIS serves as a liaison between the industry and the USDA, and provides timely information about crop insurance to the general public.

In response to the Deficit Reduction Plan unveiled today by President Obama, Tom Zacharias, President of National Crop Insurance Services, released the following statement:


FOR IMMEDIATE RELEASE
September 19, 2011

“The crop insurance industry shares the belief that deficit reduction is important. In fact, crop insurers have contributed more than most other industries to the goal of deficit reduction in recent years. However, the President’s plan to make further reductions to the crop insurance system does not serve the best interests of America’s farmers or the country’s food security.

“The plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events — from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.

“The White House calls for further streamlining of the Federal Crop Insurance Program, which has already contributed more than $4 billion towards deficit reduction, and $12 billion overall in spending reductions since 2008. Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”

###

In response to the Deficit Reduction Plan unveiled today by President Obama, Tom Zacharias, President of National Crop Insurance Services, released the following statement:


FOR IMMEDIATE RELEASE
September 19, 2011

“The crop insurance industry shares the belief that deficit reduction is important. In fact, crop insurers have contributed more than most other industries to the goal of deficit reduction in recent years. However, the President’s plan to make further reductions to the crop insurance system does not serve the best interests of America’s farmers or the country’s food security.

“The plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events — from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.

“The White House calls for further streamlining of the Federal Crop Insurance Program, which has already contributed more than $4 billion towards deficit reduction, and $12 billion overall in spending reductions since 2008. Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”

###

Greg Meek Presented the NCIS Membership Services Award


FOR IMMEDIATE RELEASE
February 16, 2011

OVERLAND PARK, Kansas – February 16, 2011

OVERLAND PARK, KAN…Greg Meek, formerly of Farmers Mutual Hail Insurance Company of Iowa, West Des Moines, IA, was presented with the National Crop Insurance Services Membership Services Award at the 2011 Crop Insurance Industry Annual Convention.

Greg devoted most of his 36‐year career to the promotion and betterment of Farmers Mutual Hail Insurance Company of Iowa, and the crop insurance industry as a whole. Through the years, Greg’s insight, integrity, and experience have been key components to his success.

Greg began working for Farmers Mutual Hail as an adjuster, then field supervisor and finally state supervisor for Arkansas and Missouri. He moved to the home office in 1995 to become the assistant claims manager and, soon after, claims manager. Greg retired from Farmers Mutual Hail late last year as the senior vice president of the MPCI Department.

Greg gave generously of his time to industry associations. He rose to the top positions on some committees because of his leadership and willingness to go the extra mile. Greg served as chairman of the NCIS Crop‐Hail Policy, Procedure and Loss Adjustment Committee for many years and oversaw many changes to handbooks, policies and the research projects.

###

Mike Gaynier Awarded the Crop Insurance Industry Outstanding Service Award


FOR IMMEDIATE RELEASE
February 15, 2011

OVERLAND PARK, KAN… Mike Gaynier, Spartan Crop Insurance, Ithica, Mich., is the recipient of the 2011 Crop Insurance Industry Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Steve Harms, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2011 Crop Insurance Industry Annual Convention.

Mike grew up in southeast Michigan and graduated from Central Michigan University. He began his career as an agricultural loan officer with the Farm Credit Services of Southeastern Michigan and soon became the branch manager for Monroe County. During this time, Mike realized how well crop insurance worked with the other services the Farm Credit System provided. He became a leader in promoting crop insurance and became a key person in the Michigan “A” Team – a team comprised of the five Farm Credit Associations chartered in Michigan, traveling throughout the state to promote crop insurance.

In 1997, Mike left the Farm Credit System and purchased a partnership in the Spartan Crop Insurance Agency to devote his full time to promoting crop insurance. Over the next few years under Mike’s leadership and the help of his partners Scott Crumbaugh and Eric Cook, the agency grew to servicing business in eight states, and they have developed relationships with other organizations providing services and products for area farmers. This model continues to expand and has allowed Mike and his affiliates to become one of the largest crop insurance agencies in their operating area.

One such relationship is with The Andersons, a regional grain company located in Maumee, Ohio. In addition to originating grain, The Andersons provide many products that assist farmers in putting together a marketing plan allowing their customers to achieve a better price for their commodity and to achieve a profit for their farm enterprise. Mike has always promoted that crop insurance and a good marketing plan allow farmers to be more profitable. He has conducted many seminars with thousands of farmers, assisting them in understanding how this concept can provide the best opportunity to be profitable over time.

Mike lives in an area that has many specialty crops such as tomatoes, cabbage, perennial crops, and organic crops are common in this area as well. Mike and his affiliates work with specialty crop groups to make sure they understand the crop insurance products that are available. He and his affiliates conduct seminars with the groups and then follow up with each individual to make sure they understand what products are available and how they work.

Mike stays active with his state legislators to ensure they all understand current crop insurance issues and the importance of crop insurance. He is well acquainted with his U.S. Representative, John Dingell. It is not uncommon for Mike to receive calls from the Congressman’s staff concerning crop insurance issues. This personal relationship allows him to speak directly to the Congressman if the issue is one that needs his attention.

Mike is married to his high school sweetheart, Wendy and together they share two children, Matthew and Lindsey. Matt is also a graduate from Central Michigan University and Lindsey a graduate from Michigan State University. They live in Monroe, Mich.

Mike was nominated for the award by Agro National, Inc., Council Bluffs, Iowa.

###

Crop Insurance Deadline Nears


FOR IMMEDIATE RELEASE
February 14, 2011

OVERLAND PARK, Kansas – January 24, 2011 – Farmers Encouraged to See Agent Soon

With a February 28 crop insurance deadline looming for producers of most spring‐planted crops across the south, staying eligible for FSA’s crop disaster program (SURE) will be on the minds of most farmers.

All insurable crops must be covered, with limited exceptions, to be eligible for SURE. Guarantee levels for SURE (Supplemental Revenue Assistance Payments) reward those who invest in high levels of crop insurance protection.

The higher your level of crop insurance coverage is, the higher your guarantee under the SURE program will be. In a way, SURE is like free, additional crop insurance coverage.

Also, the new Common Crop Insurance Policy Provisions are in place so producers will want to talk to their agent about how the change may affect their current policies.

The range of insurable spring planted crops varies from state to state, but cotton, corn, soybeans, rice, grain sorghum, and tobacco are among the most common crops.

For more information, contact a crop insurance agent well before the deadline.

###

Crop Insurance Industry Agrees USDA’s Good Performance Program Benefits Farmers


FOR IMMEDIATE RELEASE
January 24, 2011

OVERLAND PARK, Kansas – January 24, 2011 – The private insurance industry supports USDA’s decision to implement a good performance‐based program for famers.

“The Good Performance Refund (GPR) program has its merits, and we were pleased to see the savings resulting from the renegotiation of the 2011 Standard Reinsurance Agreement reinvested into the program” said Tom Zacharias, President of National Crop Insurance Services, a trade association representing the private crop insurance companies. “However, it would have been preferable to have more time to evaluate the proposal and provide effective input.”

One of the major concerns is that the industry is not being effectively utilized in the delivery of the proposed initiative. The public/private partnership has worked for over three decades to deliver a program characterized by high levels of participation.

“Farmers will logically turn to their agents first if they have questions about their refund,” said Zacharias. “It is unfortunate that the private companies and their agents are not directly in the loop for this initiative.”

Despite their reservations with the Good Performance Refund proposal, the industry encourages USDA to continue implementation for those who deserve this economic benefit.

“With market volatility and rising input costs, it’s important for RMA to push forward with this program,” said Zacharias. “We do hope that following the 2011 implementation of the GPR concept RMA will re‐evaluate the program and include its delivery partners in the process.”

###

Bob Parkerson to retire as NCIS President on August 31 Tom Zacharias to be named President

NATIONAL CROP INSURANCE SERVICES
8900 Indian Creek Parkway, Suite 600
Overland Park, KS 66210

FOR IMMEDIATE RELEASE
August 24, 2010

For more information contact Laurie Langstraat at (913) 685-2767

Bob Parkerson to retire as NCIS President on August 31
Tom Zacharias to be named President

OVERLAND PARK, Kansas – August 24, 2010 – National Crop Insurance Services (NCIS) announced today that Robert (Bob) Parkerson, NCIS’ President and member of its Board of Directors, will retire effective August 31, 2010, and Tom Zacharias, NCIS’ Executive Vice President, has been named his successor.

“On behalf of all NCIS members, I want to thank Bob for his commitment and leadership of NCIS,” said Steve Harms, Chairman of the NCIS Board of Directors and Chairman of Rain and Hail L.L.C. “Bob has raised the visibility and credibility of NCIS through his passionate work on behalf of a strong crop insurance program with members of Congress, the Risk Management Agency, and the National Association of Insurance Commissioners. During Bob’s tenure at NCIS, crop insurance has grown to become the cornerstone of agricultural risk management and we all recognize and appreciate Bob’s countless contributions to that success.”

Prior to Parkerson joining NCIS in April 1993, he was president of the Crop Insurance Research Bureau (CIRB). His responsibilities included overseeing the business operation of NCIS and reported directly to the NCIS Board of Directors.

“Tom has been a proven leader at NCIS for 20 years,” said Harms. “He understands the business side of the crop insurance industry and the need for NCIS to continue to provide timely and accurate data for the member companies to use in their business models. Tom brings a wealth of knowledge and experience to his new position as President of NCIS and we are confident that under his leadership NCIS will continue to contribute to the success of its members and the crop insurance program.”

Zacharias joined NCIS in 1990 and was promoted to Executive Vice President in 1998. Zacharias holds a Ph.D. in Agricultural Economics from the University of Illinois (1984), with B.S. (1977) and M.S. (1980) degrees in Agricultural Economics from Texas A&M University. Prior to NCIS he served on the faculties of Iowa State University and Louisiana State University.

National Crop Insurance Services National Crop Insurance Services (NCIS) is an international not-for-profit organization representing the interests of private crop insurance companies that write Crop-Hail Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk management program; and, privately developed crop insurance products.

###

STATEMENT OF ROBERT PARKERSON, PRESIDENT, NATIONAL CROP INSURANCE SERVICES, BEFORE THE U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT


FOR IMMEDIATE RELEASE
July 22, 2010

Mr. Chairman, Mr. Ranking Member and other Members of the Subcommittee, thank you for inviting the National Crop Insurance Services to appear at today’s hearing to discuss the Standard Reinsurance Agreement (SRA) and its implications for the future of the crop insurance industry.  I will briefly describe the role of NCIS and the approved insurance providers (the companies) in the negotiations of the 2011 SRA, identify some key issues of agreement and controversy, and conclude with an assessment of why the new SRA, combined with other factors, raise serious concerns for the crop insurance industry as it moves ahead, striving to provide the best in risk management service to America’s agricultural producers.

The Function of NCIS in the Crop Insurance Industry

NCIS is a not-for-profit trade association whose members include every crop insurance company that participates in the Federal crop insurance program.  NCIS and its predecessor organizations have provided members support in their crop insurance businesses since 1915.  NCIS has worked actively with the Risk Management Agency (RMA) as an approved contractor and with the Board of the Federal Crop Insurance Corporation (FCIC) as an expert reviewer.

NCIS is also a licensed advisory organization and statistical agent for private Crop-Hail insurance in forty-nine of the fifty states, and it assists the crop insurance industry in meeting the regulatory requirements of these states.  This is accomplished by filing the appropriate policy forms and statistical information with state insurance departments.  Further, NCIS serves as a liaison with individual state insurance departments through active participation with the National Association of Insurance Commissioners (NAIC).

In 2009, NCIS member companies wrote nearly $9 billion in Federal multiple peril crop insurance and related revenue products premium and $620 million in private Crop-Hail insurance products premium.  The potential liability between both programs was approximately $105 billion.  NCIS member companies service policies that encompass all farmers participating in the federal and private programs, including limited resource and socially disadvantaged farmers.  In partnership with the Federal government, our participating member companies comprise the safety net that equitably provides the preeminent risk management program to America’s farmers.
Role of NCIS and the Companies in the SRA Negotiations

NCIS began preparations for the new SRA early in 2008 by engaging company leaders on the future of the industry.  By early 2009, after being advised by the administration that the 2005 SRA was unlikely to be renewed for the 2011 reinsurance year, NCIS and all 16 companies that deliver the Federal crop insurance program to America’s farmers met and initiated a specific plan for negotiating the new SRA.  NCIS organized five working groups, chaired by and consisting of representatives from all 16 crop insurance companies.  The working groups addressed five subject areas:  financial provisions, the Plan of Operations, information technology and data, quality standards and controls and education and training.   The working groups met beginning last spring, reviewing the performance of the 2005 SRA and developing recommendations for the 2011 SRA.

In September 2009, RMA notified Congress that the 2005 SRA would not be renewed.  In October 2009, in response to RMA’s request for SRA proposals from the industry, NCIS submitted formal recommendations for the 2011 SRA on behalf of its member companies and reflecting the efforts of the working groups.  Since December 2009 when RMA released the first SRA draft until mid-July 2010, when the 2011 SRA went into effect, NCIS and the companies held frequent meetings with RMA and provided substantial written comments to RMA on the first and second drafts.  NCIS also organized a technical, legal review of the final SRA conducted by NCIS and company attorneys.  Throughout the process, NCIS was very aware of antitrust issues and worked closely with USDA’s Office of General Counsel, RMA leadership, industry leadership and third party legal counsel to ensure the negotiations were conducted properly.  On behalf of the industry, we thank Members of Congress for including language in the 2008 Farm Bill that ensured the companies could confer with one another and with RMA in developing the new SRA.

NCIS and its member companies organized and carried out their activities with the primary objective of negotiating transparently and in good faith.  Among our objectives was a new agreement that ensures effective service to producers, safeguards taxpayers’ interests, and provides an opportunity for the insurance companies to earn a reasonable return relative to other lines of insurance, accounting for their relative risks.  Unfortunately, the final agreement may put all these objectives at risk.

The Negotiations:  Substantive Issues but a Predetermined Outcome

The first draft of the SRA released in December 2009 set an ominous tone for the negotiations.  The first draft was a significant overreach by the administration.  The administration proposed an unprecedented and potentially very damaging reduction of $8.4 billion over 10 years in program funding.  They proposed an inflexible formula for calculating administrative and operating (A&O) expense payments to the companies that would have used a proxy measure of premiums based on fixed “reference prices.”  These reference prices were sharply below policy prices and would never change.  The first draft replaced the Assigned Risk Fund with a “Residual Fund” that would have enabled companies writing bad business to shift their risks to other companies.  The first draft’s reinsurance terms created separate gain and loss provisions for four different groups of states; groupings that had little apparent rationalization.  The reinsurance terms sharply reduced potential gains while also reducing potential losses, in effect shifting risk to taxpayers and crowding out private reinsurance.  Moreover, the administration proposed increasing the net book quota share—its tax on underwriting gains—from 5% to 10%.  Crop insurance companies are in the business of taking on and managing risks, but the administration wanted to take over risks and the potential for gains as well, moving away from the Federal Crop Insurance Act’s reliance on private industry and exposing the taxpayer to greater losses in bad years.

I will not belabor the industry’s position at the beginning of the process, beyond saying that the administration’s first-draft overreach was so great that subsequent concessions by them would still leave the companies at a serious disadvantage.  Clearly, the 2011 SRA was a budget-driven process that took full advantage of the companies’ short-term inability to exit the program.  Congress authorized a negotiation in the 2008 Farm Bill presumably with the idea that it be open and balanced.  But, the administration had a budget cutting target and simply staked out an extreme position to the right of it, knowing full well that, in the end, the companies had no choice but to accept the final outcome.

In the second and third drafts of the 2011 SRA, the gap between the administration’s proposals and the companies’ proposals narrowed.  The reference price concept was thrown out, the Residual Fund concept was dropped, the number of state groups for reinsurance terms was reduced from four to two (the first group includes the Corn Belt states of Iowa, Illinois, Indiana, Minnesota, and Nebraska and the second comprises all other states), and the reinsurance terms were improved for the companies.  There were a number of concepts that companies and the administration could agree upon.  Both sides wanted to address the concern that A&O payments could unnecessarily shoot up when there are market price spikes, such as occurred in 2008.   Both sides agreed that reinsurance gain and loss provisions should be made more profitable for the lowest return states and reduced for the highest return states.  This “rebalancing” of returns would help companies cover costs and hopefully earn a small underwriting profit in the low return states.

Unfortunately, the final 2011 SRA fails to achieve a fair balance among these shared concepts.  The final draft has been signed by the 16 companies, but that hardly means the companies think things are satisfactory.  Here are a few of the glaring issues with the 2011 SRA:

  • The size of the overall funding cut remains unsupported and represents a decided risk to the companies.  The administration premised its budget-cutting objective on two RMA-funded studies (contracted to Milliman, Inc.) on the companies’ rate of return on equity.  The flaws in this approach are legion.  First, the administration never provided an explanation of how the Milliman results were utilized to determine the final gain and loss provisions for reinsurance.  Second, the Milliman studies are rebuttable on numerous grounds.  Milliman estimated the equity of crop insurance firms using a model that did not take account actual firm equity and crop insurance regulatory requirements for equity, thus producing unverifiable estimates of industry equity; they failed to consider reinsurance and actual A&O costs; and they did not include a long enough period of time to adequately account for the potential for catastrophic loss.  The administration repeatedly defended its proposals in public based on the returns to companies since 2006, a period that included an unusually rare spike in crop prices and the two lowest loss ratio years in the history of the program dating to 1981.  Arguing for steep budget cuts based on unusual circumstances clearly is not a sound actuarial basis for determining expected future returns and establishing sound policy.  The administration appears to be betting that the program’s good performance in recent years will continue.  The insurance companies have to go along for the ride, but they may have no seat belt on.
  • The A&O cap used by the administration in the final SRA is preferable to the use of fixed reference prices; however, RMA’s change in approach does not mask the reality that the A&O cuts remain large coming on top of the A&O funding reductions of the 2008 Farm Bill.  RMA’s own assessment shows A&O cuts of $220 million per year during 2011-2015.  These A&O cuts are being imposed oblivious to the payment delays that will occur in 2012.  As a result of a 2008 Farm Bill budget mechanism, companies will have to wait up to 9 months to receive payments from RMA to fund their businesses.  Operating costs must be paid and companies will have to borrow in difficult credit markets to meet payrolls.  Moreover the new A&O reductions were determined before RMA has completed its study of agent costs of delivery.  RMA agreed with recent GAO findings that a study of agent business costs was necessary to fully understand total delivery expenses and to judge the appropriate level of delivery payments to companies and agents.  In this case, there were insufficient facts to influence a predetermined budget cut.
  • The 2011 SRA implements soft and hard caps on the companies’ compensation of agents.  These caps were not proposed by NCIS in its initial recommendations to RMA last October and were not proposed in any comments submitted to RMA on the SRA drafts.  The soft cap, which restricts agent compensation to 80% of the A&O a company receives in a state, first appeared in the second draft SRA.  However, the hard cap, which restricts agent compensation plus profit sharing to 100% of the A&O a company receives in a state, was presented in the final SRA—without the opportunity to comment by the companies.  These A&O provisions are fraught with competitive issues and administrative problems.
    • A major problem is that RMA will not know the overall limit on A&O payments until the year is over.  Companies must pay their agents for their work before the year is over.  How will companies know what 80% of their A&O payments are when they won’t know what their total payments will be until the year is over?
    • Another critical issue is the definition of compensation.  NCIS has agreed to work with RMA to define agent compensation in a clear way so that companies will be able to implement the caps without being out of compliance.  It is obvious at this point that the caps on agent compensation could easily be violated quite unintentionally by companies that are assiduously trying to stay within the caps.  Penalties for noncompliance may be severe.  We recommend that Congress keep abreast of this issue and help ensure that RMA shows forbearance for unintentional violations.
    • Finally, many of our member companies have raised concerns over the impact of the caps on agents.  They fear that agents may shift from one company to another to chase the prospect of better profit sharing.  They fear that the compensation caps could lead to consolidation and reduced service, especially for smaller farm operations that have lower premium volume.  We recommend that Congress monitor closely the structural changes that may take place among agents and companies as a result of the change in A&O payments and agent commission caps.
  • The final gain/loss provisions and A&O reductions combined are expected to reduce returns well below historical levels in the Corn Belt states.  In addition, the changes in prospective net returns in other states do not reflect their loss experiences.  The administration rejected the industry’s recommendation that higher return states that were not put into Group 1(Corn Belt)  be given less favorable reinsurance terms than the underserved states.  Preliminary NCIS analysis indicates that had the 2011 SRA been in effect for 2009, the Group 1 states would have had a combined reduction in A&O payments and underwriting gains of nearly 25%.  The remaining states, while seeing an increase in underwriting gains, would still have faced a collective decline of around 6% in A&O payments and underwriting gains combined.  It is unclear how such a decline in returns is going to increase incentives for companies to operate and improve service in low return states, as the administration claims.

In addition to the problems just identified with the key financial terms of the 2011 SRA, the SRA imposes a range of administrative requirements on the companies.  Many people do not realize that the SRA encompasses hundreds of pages of IT, data reporting (such as common land units and FSA data reconciliation), training and quality control requirements (such as large claim reviews).  These regulatory burdens continue to escalate.  For example, the Crop Insurance Handbook for the 2011 SRA, which specifies the requirements to write crop insurance, is now 834 pages long, compared with 525 for the 2005 SRA.  Appendix III of the 2011 SRA, which specifies information and reporting requirements, is 826 pages, compared with 205 pages for the 2005 SRA.  In addition to these SRA requirements, FCIC continues to approve new products and revise and expand existing products, all of which demand increased servicing by the companies.  For example, between 2000 and 2009, there have been 37 introductions of new crop or insurance plans.

The 2011 SRA:  A Yellow Flag that Augurs for Policy Caution over the Next Several Years

As the industry looks ahead, we can find little security in the developments of the past two years and the economic prospects before us.  Congress and others need to know that the combination of the $6.4 billion in 2008 Farm Bill reductions, the $6 billion in SRA reductions, the delay in payments to companies in 2012 and the increase in workload and investments needed to adequately deliver this program and meet its regulatory requirements are going to strain this industry, even with normal weather over the next several years.  The companies must do more and are going to get paid less, and get paid less frequently, to do it.

The 2011 SRA outcome raises several issues relevant to future actions by Congress.  First, the Federal crop insurance program, the safety net for American farmers and ranchers, has now contributed greatly towards deficit reduction.  We believe we have done so for this industry as well as for production agriculture in general.  We ask that this Committee work to ensure that these funding cuts receive appropriate recognition and prevent further cuts for production agriculture, such as in the 2012 Farm Bill.

Second, while the industry would hope to be able to move forward with no further financial shocks, we emphasize that, unlike private property casualty companies, crop insurance companies do not set premium rates and cannot compete using rate changes.  Nor are the companies able to adjust rates to recoup losses in previous years.  Premium rate changes can have major impacts on industry profitability, and the companies are handicapped by not knowing what will happen with respect to premium rates.  Historically, the companies have not been part of the rate setting process.

Third, Congress should assess the concept of a periodically negotiated SRA.  The companies have little leverage to conduct such a negotiation as an equal partner with RMA.  RMA conducted the negotiations in a mutually respectful fashion but with far less than full transparency.  Requests for key data and analyses were not satisfied.  Even today, as we testify, we do not have the details of the baseline USDA used to score the 2011 SRA.  In the final SRA draft, which was not negotiable, RMA introduced major new concepts that had not received public or industry comment.  These concepts included the hard cap on agent commissions and the requirement that companies forgo legal recourse in the event that the administration has acted illegally with its A&O provisions.  Finally, should multi-billion dollar changes in legislated programs be made through unilateral discretionary actions?

The crop insurance companies are committed to the public-private partnership.  We are committed to the efficient functioning of competition and markets.  We believe the private sector, not the government, is the best way to provide the individual risk management information and tools that are indispensible for farmers today.  We believe that is the way farmers want the program to operate.  We believe this program can be expanded and improved to provide even better protection for farmers and ranchers. We ask that Congress pay careful attention to the impacts of the 2008 Farm Bill and the 2011 SRA and work with the crop insurance industry to strengthen this valued program.

Thank you Mr. Chairman, that completes my statement.

###

Crop Insurance Industry Testifies Before House Committee on Agriculture Hearing Comes on Heels of Crop Insurance Companies Signing SRA, Industry Remains Concerned About Preserving Farm Safety Net

FOR IMMEDIATE RELEASE

July 22, 2010

OVERLAND PARK, KAN, July 22, 2010… Bob Parkerson, president of National Crop Insurance Services (NCIS), testified today on behalf of the crop insurance industry before the U.S. House Agriculture Subcommittee on General Farm Commodities and Risk Management.

“The federal crop insurance program is the largest part of the federal farm safety net, protecting $80 billion in America’s agriculture production,” said Parkerson. “It’s the best and most effective risk management tool available to farmers, and we continue to be committed to providing producers and ranchers with a sound and effective crop insurance program.”

“Yet, in light of the recent Standard Reinsurance Agreement (SRA), the uncertain and lingering financial impact of the 2008 Farm Bill, and current deliberations on the 2012 Farm Bill,” he added, “we think it’s critical to lend our perspective to these deliberations and raise awareness of the challenges we face as an industry due to these budget cuts, particularly how they could potentially disrupt the program, and diminish the level of service and coverage to farmers.”

An Arduous SRA Negotiation: A Predestined Outcome
Member companies of the crop insurance program recently signed the SRA after a long and, at times, challenging negotiation with USDA. The new agreement calls for a $6 billion cut from the program over 10 years, which can be added to a $6.4 billion reduction from the 2008 Farm Bill.
Parkerson testified that the SRA process started in 2009, with the industry entering discussions with USDA’s Risk Management Agency (RMA) in the spirit of open and fair negotiation, as deemed by Congress in the 2008 Farm Bill.

-more-
He testified that the industry created working committees and provided detailed comments to each of RMA’s first two drafts, yet the two sides emerged from the negotiations with several issues still unresolved. Data requested by the industry, for example, was never provided by RMA, and there were wholly new concepts introduced by the Agency in the final draft that were never submitted for public, or industry comment.

“We share the same goals of Congress and the Administration for deficit reduction and a cost-efficient program,” said Parkerson, “and we have contributed toward meeting these goals for the industry and production agriculture.”

Parkerson asked the Committee and Congress to carefully consider the recent SRA negotiation process and give adequate recognition of these cuts as the 2012 Farm Bill hearings continue, with the understanding that the industry is still trying to determine how to manage reductions from both the SRA and the 2008 Farm Bill without any control on setting premium rates – something that is unique to crop insurance as compared to other types of insurance.

He added that companies have tough choices to make with respect to major operational changes as a result of these financial concessions, including possible consolidation and less investment in technology. Many companies will also have to consider the feasibility of regional offices and re-evaluate whether they can continue to develop innovative peril products, which some companies created for farmers to cover crops or perils not currently covered under the federal program.
The industry is also concerned about delayed service and payments to farmers due to the possibility of having fewer adjusters.

“Something has to give, and we don’t want it to be at the expense of the farmer,” Parkerson said. “But I don’t know how we’ll replace service to those who might be impacted by consolidation,” he said.

Parkerson vowed that the industry will remain committed to the program. “Our industry can’t, and will not walk away from farmers and our responsibility to provide them with an effective farm safety net. We will continue to work with Congress through the farm bill process to preserve the industry’s private delivery system, which has proven so effective throughout this program’s public-private partnership.”

###

Crop Insurance Industry to Testify Before House Committee on Agriculture, Press Availability for Bob Parkerson


FOR IMMEDIATE RELEASE
July 19, 2010

OVERLAND PARK, KAN…The crop insurance industry announced today that Bob Parkerson, president of National Crop Insurance Services (NCIS) has been invited to testify before the House Committee on Agriculture Thursday about the state of the crop insurance industry, including implications of the recently signed Standard Reinsurance Agreement (SRA) and 2008 Farm Bill.

“We are pleased to have the opportunity to contribute to these deliberations,” said Parkerson. “The crop insurance program is the largest part of the Federal farm safety net, and we are grateful for the chance to lend our perspective on how we can continue to protect farmers through our public-private partnership, particularly as discussions begin on the next farm bill.”

Mr. Parkerson and Dr. Keith Collins, a consultant with the industry, will also be available to speak with the press via conference call at 2pm Thursday.

Who: Bob Parkerson, President of National Crop Insurance Services.
What: Mr. Parkerson has been invited to testify before the U.S. House Agriculture Subcommittee on General Farm Commodities and Risk Management.
When: 9:30 AM
Thursday, July 22, 2010
Where: 1300 Longworth House Office Building.
Washington, D.C.
Details: Live audio and video will be available at the start of the hearing, and can be accessed at http://agriculture.house.gov/hearings/audio.html.  If in need of special accommodations, please call (202) 225-2171 at least four business days in advance of the event.

NOTE: Mr. Parkerson and Dr. Keith Collins will be available to discuss his testimony at 2 PM.

Dial In: 800.531.3250 Pin: 1847179

###

Negotiations May be Complete, but Industry Remains Vexed By the Funding Reductions in Final SRA

FOR IMMEDIATE RELEASE
July 1, 2010

OVERLAND PARK, KAN… The crop insurance industry and the program will withstand the $6 billion reduction in funding handed to them by the USDA’s final Standard Reinsurance Agreement (SRA) contract released on June 29, 2010.  Companies have until July 12th to sign the agreement.

“Our hands are tied,” said Bob Parkerson, president of National Crop Insurance Services.  “The companies have no choice but to sign this SRA because, if they don’t, they cease operating and the safety net that America’s farmers and ranchers rely on so heavily would be disrupted.”

Although the industry feels the negotiation process was generally handled reasonably well by USDA, there were terms and conditions added to the agreement very late in the process that gave companies very little time to react and negotiate a contract that was fair to all parties.  Constraints on legal recourse of companies and agents are particularly problematic.

“I think our definition of ‘negotiate’ was very different from USDA’s,” said Parkerson.  “They made a few concessions to some of the technical aspects of the agreement, but they didn’t budge on the $600 million a year cut in funding, despite the damage it will do to the financial foundation of the program.”

The private insurance companies will now need to evaluate how reductions will affect the quality of service they provide to producers, and scramble to maintain the financial reserves mandated by the SRA.

“I remember early on in this negotiation process reading that Secretary Vilsack said this is an easy product to sell,” said Parkerson.  “It reminds me of a quote from Dwight D. Eisenhower when he said …Farming looks mighty easy when your plow is a pencil, and you’re a thousand miles from the corn field.”(Dwight D. EisenhowerSeptember 11, 1956)

###

Crop Insurance Companies Still Very Concerned with Components of the Standard Reinsurance Agreement

FOR IMMEDIATE RELEASE
June 14, 2010

Industry Hopeful that Continued Negotiations will Protect the Key Safety Net for America’s Farmers and Ranchers

OVERLAND PARK, KAN…The crop insurance industry is surprised that even after repeated requests by Congress, producers and the Industry, the Administration still plans to cut the crop insurance program by $6 billion over the next ten years. USDA’s Risk Management Agency released its final draft of the Standard Reinsurance Agreement (SRA) on June 10, 2010.

“We negotiated this contract in good faith with USDA and we are frustrated that our concerns for the financial stability of this 30-year program were not adequately addressed,” said Bob Parkerson, President of National Crop Insurance Services.

The industry is still experiencing the $6.4 billion cuts that came out of the 2008 Farm Bill and will soon face nine months of no income as part of these cuts.

“Now we have to figure out how an additional $6 billion decrease will not seriously undermine the industry’s ability to effectively deliver this program,” said Parkerson.  “Unfortunately, USDA seems to have lost sight that this program is in place to provide a sound financial risk management tool for America’s farmers and ranchers.”

Some of USDA’s proposed financial terms are far more complex than would appear from its side-by-side comparison released June 10th and will take some time to analyze.
The industry is also disappointed that USDA used a “final” draft to introduce significant terms that did not appear in the first and second drafts, which apparently USDA plans to implement without full industry review and negotiation.

Companies are evaluating their positions and RMA representatives have committed to meet with industry representatives in Kansas City on June 18th.

“We hope continuing dialogue and the meeting on Friday will establish a foundation for constructive changes to this latest version of the SRA,” said Parkerson.  “While the new SRA creates new financial risks and severely undermines the stability of the crop insurance industry, the crop insurance companies remain dedicated and focused on providing high quality service to America’s farmers and ranchers.”

###

NCIS Statement Regarding Professor Bruce Babcock’s ACRE Plan

FOR IMMEDIATE RELEASE
May 14, 2010

Testimony of Professor Bruce Babcock released in advance of the House Committee on Agriculture hearing scheduled for May 14, 2010, on the 2012 Farm Bill, raised the idea of providing protection to farmers from systemic risk by using an area-based revenue plan. The plan would presumably cover all producers, be 100% subsidized and make a payment when actual county revenue fell below a target county revenue, similar to ACRE. Farmers would use crop insurance to insure their individual risks beyond the risks covered by the area plan.

Professor Babcock’s idea for a county-level ACRE plan has been around for several years and still leaves many conceptual and operational questions unanswered. One question is how to pay for the substantial additional delivery costs involved in simply giving this program to every producer. Farmers consciously make a decision to manage their risks when they choose to participate financially in crop insurance, which is in great contrast to the Professor’s suggestion. Other major issues with area plans are that they don’t protect farmers from individual losses nor do they work well particularly for farmers who do not grow conventional field crops. Certainly, most lenders wouldn’t accept this program as adequate collateral when providing operating loans to farmers. It is also important to recognize that county-based revenue insurance (GRIP) is already available to many producers through the Federal crop insurance program. Whether an existing program, delivered through the private sector and cost-shared with producers, should become a fully subsidized farm program run by the government is very questionable. It is early in the 2012 Farm Bill process and this idea, like some others now surfacing, needs much more evaluation.

###

Crop Insurance Industry Lends Perspective To Ewg’s Analysis Of Farm Programs

FOR IMMEDIATE RELEASE
May 6, 2010

Overland Park, Kansas…The crop insurance industry cautioned today against relying on partial assessments of the Federal crop insurance program. The industry voiced these concerns again in light of the Environmental Working Group’s (EWG) report released yesterday which evaluated for the first time data from the crop insurance program.

The crop insurance program is founded on the principle that a public-private partnership, carefully structured and implemented, can result in the best overall performance for farmers and the taxpayer. It provides private sector financial accountability and a business person’s attention to cost-saving details. It also fully takes into account the unique public challenges of helping farmers simultaneously manage the risk of producing crops on hundreds of millions of acres. Because the program works, the acres and farm value insured has grown dramatically. In 2000, there were 206 million acres in the program with $34 billion in liability, and by 2008 there were 272 million acres insured with $90 billion in liability.

“Crop insurance has become a key element of the farm safety net for farmers,” said Bob Parkerson, President of National Crop Insurance Services (NCIS).

As a private sector oriented insurance program, policy makers have to confront a unique set of challenges and considerations while they pursue efficiency and protections that are accessible to all farmers. It’s important to understand these challenges in a public-private partnership where the crop insurance industry, farmers and the taxpayer are all sharing in the risks and liability.

“The industry, in partnership with private reinsurance companies, has taken on at least 80 percent of the liability in the program since 1998,” Parkerson noted.

The costs of the crop insurance program have grown relative to farm price and income support program, as EWG notes. But that growth reflects the coverage of more crops, livestock and livestock products; greater program participation; higher values of crop production over time; some substitution for ad hoc disaster payments; and, the availability of more insurance products — including 37 new crop or insurance plans introduced since 2000.

Attempting to evaluate performance using a few years of data is inadequate for crop insurance products. EWG cited insurance program’s historically high costs in 2009, for example. While the figure they cite overstates the cost (the USDA Risk Management Agency calculates the cost for the fiscal year at $7.3 billion rather than the $8 billion cited by EWG, (seehttp://www.rma.usda.gov/aboutrma/budget/fycost2001-09-1.pdf), the more important omission is not acknowledging the long-term insurance principle at work. Costs were high in fiscal year 2009 in large part because there were also record-high losses of $8.4 billion. Over a long enough period of time, which reflects the variety of representative weather outcomes, losses and gains to the companies are more even and result in cost-effective financial returns to the industry. An independent analysis by Grant Thornton over a 17-year period (1992 to 2008) shows that the crop insurance program is significantly less profitable than the property and casualty industry, and has consistently lower expense to premium ratios.

“One of the major assets of the program has been its stability,” Parkerson added. “Farmers can depend on it and so can their bankers,” he added.

The stability is built into the program by the government’s requirement that the companies maintain sufficient reserves to handle back-to-back years with large losses. Taxpayers, too, share in this risk; that is the public side of this program. Without the public contribution it would not be possible to affordably insure farmers from widespread losses due to bad weather and similar risks.

An informed review of the crop insurance program and its proper role in the farm safety net should yield improvements that benefit farmers and taxpayers while preserving the private sector elements that have sustained the program and made it a success. The crop insurance industry welcomes the upcoming farm bill reauthorization and looks forward to working with Congress and stakeholders, like the EWG, to this end.

###

Industry Calls for Long Term Analysis in Judging Crop Insurance Market Performance

FOR IMMEDIATE RELEASE
April 5, 2010

OVERLAND PARK, KANSAS..USDA’s Risk Management Agency (RMA) released late last Friday an update of their disputed Millman study of returns to private crop insurers participating in the Federal Crop Insurance Program. While the report focuses on 2009 earnings, which indeed represent the second highest ever, it is more reflective of record-high crop yields than indicative of the future profitability of the crop insurance industry.

RMA understands too well that conclusions can’t be drawn from data representing such a narrow timeframe. A long-term view is essential when analyzing a program based on a private insurance model, where any year’s returns can vary due to weather or fluctuating crop prices. In fact, when discussing the rating of crop insurance policies in a recent interview, USDA’s Risk Management Agency Administrator William Murphy indicated that a short timeframe is inappropriate when making crop risk-based policy decisions, adding that the analytical horizon had to extend back to the middle 1970’s to ensure the policies were correct.

Corn and soybeans account for two-thirds of crop insurance business. In 2009 these crops each had record-highs in total production. But looking back to as recent as 2008, which was not a disaster year but featured corn and soybean yields close to trend values, RMA reports the rate of return on equity at 12.9%, less than half RMA’s estimate for 2009. If the country had growing conditions in 2009 closer to the severe flood conditions of 1993 or the severe drought conditions of 1988, and crop yields were dramatically below trend values and the return on equity in the crop insurance industry would have been sharply negative with companies losing billions of dollars.

Beyond the obvious concern with using one year of data to judge the financial performance of the industry, RMA’s analytical methods used to estimate rates of return on equity have been challenged by the crop insurance industry and are not a reasonable basis for estimating expected returns to the industry. In fact, Millman itself cautions, “against drawing any strong conclusions on the adequacy or excessiveness of the historical returns.” This is particularly relevant in this case, as their analysis also fails to take into account the $6.4 billion in funds that Congress already cut from the crop insurance program in the 2008 farm bill.

An independent analysis by the firm Grant Thornton compared the profitability of the crop insurance industry to that of the property and casualty industry, an appropriate benchmark for judging financial performance. Over a 17-year period (1992-2008), Grant Thornton found that the Federal Crop Insurance Program is significantly less profitable than the property and casualty industry while having consistently lower expense-to-premium ratios. And while there have been good years, and even very good years like 2009, the public-private crop insurance partnership leverages this period to invest capital and build its reserves so that the program can cover future expected losses.

The Federal Crop Insurance Program is a successful public-private partnership that has become the primary stabilizing force in U.S. farm policy and a key element of the farm policy safety net. And one of the main reasons it has thrived is due to the mandated reserves that invest returns from good years to protect farmers during difficult years. In fact, the companies in the Federal Crop Insurance program are required to hold reserves about twice the amount currently held by the property and casualty insurance sector.

The program has grown from roughly 84 million acres in 1993 to the record year of 265 million acres in 2009. This growth in the size and importance of the program has happened in large measure due to the private delivery system that allows the agents to offer tailored coverage to meet producer’s needs. Crop insurance is essential to making farmers credit worthy and otherwise able to secure loans from banks to operate and modernize their operations. The program has grown also in part because farmers know its value and they can afford to pay the premiums.

The crop insurance industry hopes RMA and others in the policy community will take the proper, longer term view of industry performance. Such a balanced perspective is essential not only to the health and sustainability of the private crop insurers but also to the public-private crop insurance partnership, the foundation of the U.S. farm program safety net today.

National Crop Insurance Services

National Crop Insurance Services National Crop Insurance Services (NCIS) is an international not-for-profit organization representing the interests of more than 20 crop insurance companies. NCIS member companies write Crop-Hail Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk management program; and, privately developed crop insurance products totaling approximately $9 billion in premium, with liability totaling approximately $80 billion. These companies service all farmers participating in the federal program, including limited-resource and socially-disadvantaged farmers. In partnership with the government, these private companies are the safety net that equitably provides risk management to the American farmer. NCIS members range in size from one-state companies to national writers, as well as foreign company members.

###

Private Industry Still Sees Wide Gap in SRA Negotiations

FOR IMMEDIATE RELEASE
February 24, 2010

OVERLAND PARK, KANSAS… Although modestly less severe than initially proposed, the funding reductions for the crop insurance program offered yesterday by USDA/RMA in the latest round of negotiations to revise the Standard Reinsurance Agreement (SRA) remain excessive and unrealistic. In addition, the RMA’s latest proposal fails to reflect available reforms to the program’s business processes, oversight and quality control measures which would increase their effectiveness and reduce costs for both RMA and the industry.

“We are disappointed that RMA didn’t give much credence to our suggestions about ways to streamline and improve the important tasks that we must undertake to implement the program and protect its integrity in compliance with the provisions of the SRA. In fact, RMA went the other way, making these tasks more cumbersome and expensive, while simultaneously calling for huge funding cuts” said Bob Parkerson, President of National Crop Insurance Services.

Representatives from RMA made a presentation to the industry on February 17 about the changes expected in draft number 2, which was actually released on February 23. RMA’s offer to reduce the program’s funding by $6.9 billion over 10 years versus the $8.4 billion in the first draft was met with dissatisfaction and disappointment from the industry. The $6.9 billion would reduce financial support to the crop insurance companies by some 25 percent, and as was the case with RMA’s first proposal, these cuts would continue to put at risk the depth and scope of crop insurance services in many agricultural areas of the country.

The second draft also contained several impractical provisions that were not in the first draft, most notably a restriction limiting the amount of commission paid to agents, the option for companies to offer profit sharing, additional drug-free workplace requirements, and additional adjuster proficiency requirements.

“It appears that RMA, while giving a little bit back on the financial side, has increased the requirements on the operational side of the business causing the companies’ expenses to continue to rise. They claim to be listening to us, but it’s apparent that they didn’t take the time to read the comments we submitted to their first draft. We still have a long way to go,” said Parkerson.

Once NCIS and the industry have had a chance to thoroughly read and analyze the second draft of the SRA, they will provide written comments to RMA and make them available publicly.

The industry’s comments to RMA’s first draft, as well as facts that refute many of RMA’s position statements in its “Myths versus Fact” sheet can be found on the crop insurance industry website atwww.ncis.staging.wpengine.com.

###

Avtar Gill Awarded the Crop Insurance Industry Outstanding Service Award

FOR IMMEDIATE RELEASE
February 24, 2010

OVERLAND PARK, KANSAS…Avtar Gill, Gill Insurance, Caruthers, Calif., is the recipient of the Crop Insurance Industry Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Steve Harms, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Robert Parkerson, President of NCIS, presented the award at the 2010 Crop Insurance Industry Annual Convention.

Avtar Gill moved from India to the United States in 1980. In 1982 he began his crop insurance career with an agency located in Fresno, California. In 1988 Mr. Gill purchased the entire book of business from this agency, moved his office to Caruthers, California where he formed Gill Insurance. Mr. Gill services each policy in person by scheduling a date and time to meet with his insureds throughout the Southern Tejon area to Northern Redding. He is best known by his colleagues and clients for his extensive knowledge in multiple-peril crop insurance as well as various aspects of the farming industry.

Mr. Gill is an active member of Congressman George Radonovich’s Ag Committee to discuss crucial water and agriculture related issues in the Central Valley. He has also accepted invitations by Senator Barbara Boxer, Congressman Jim Costa and Congressman Devin Nunes to address issues local farmers face today. Mr. Gill is an advocate for the crop insurance, calling Congressman and Senators stressing the urgency of continuing to protect farmers against nature’s disasters.

As well as Gill Insurance, Mr. Gill and his family also own a large farming operation and three retail businesses in Caruthers.

Presenting the award to Avtar Gill was Robert Parkerson, President of National Crop Insurance Services (NCIS), and, Steve Harms, Rain and Hail Insurance L.L.C. and Chairman of the NCIS Board of Directors.

Photo Caption: Presenting the award to Avtar Gill (center) was (left) Robert Parkerson, President of National Crop Insurance Services (NCIS), and, Steve Harms (right), Rain and Hail Insurance L.L.C. and Chairman of the NCIS Board of Directors.

###

Gene Grimsley Presented Crop Insurance Industry Leadership Award

FOR IMMEDIATE RELEASE
February 24, 2010

OVERLAND PARK, KANSAS…Gene Grimsley, Agro National Insurance, Council Bluffs, Iowa, was presented with the Crop Insurance Industry Leadership Award at the 2010 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership.

Gene has been an instrumental part of the crop insurance industry since 1972 and has helped promote and educate the merits of agricultural risk management through the utilization of crop insurance to countless agents and farmers across the United States.

After 37 years in the business and thousands of miles on the road, it is safe to say that Gene has developed a knowledge base of experience about crop insurance that few people can equal. One of the great things about Gene is that he not only understands this business, he possesses a unique ability to share and transfer that knowledge on to others.

Gene started his career with the Federal Crop Insurance Corporation and moved to the private industry in 1984. He has been involved with most every phase and position of the business including claims, sales, processing and management. Gene has always been willing to offer assistance and support to individuals, as well as committee work during his career. He has been involved in numerous committees over the years, and is currently the Chairman of the NCIS Public Relations Committee. Committee work is often times consuming and may go unrecognized by many. We also know that committee work has been the lifeblood of our industry. Without the commitment of individuals like Gene and their countless hours of involvement to make this a better program, it would most certainly be worse off.

Gene grew up in Harlan, Iowa, and currently lives in Council Bluffs with his wife, Shelly. He enjoys activities with his family and anything related to Iowa Hawkeye sports.

Robert Parkerson, President, National Crop Insurance Services; Gene Grimsley, Agro National Insurance; and, Steve Harms, Rain and Hail L.L.C. and Chairman of the NCIS Board of Directors.

Photo Caption: (left to right) Robert Parkerson, President, National Crop Insurance Services; Gene Grimsley, Agro National Insurance; and, Steve Harms, Rain and Hail L.L.C. and Chairman of the NCIS Board of Directors.

###

Fundamental Problems Exist with the USDA’s Proposed 2011 Standard Reinsurance Agreement; Private Industry Seeks Solutions

FOR IMMEDIATE RELEASE
January 20, 2010

OVERLAND PARK, KANSAS..The private crop insurance industry today released a proposal for the 2011 Standard Reinsurance Agreement (SRA). The SRA is the contract under which the private insurance companies agree to deliver the federal crop insurance program to the nation’s farm producers.

The industry’s proposal is in response to a proposed 2011 SRA released by the USDA/Risk Management Agency (RMA) on December 4, 2009.  The industry is deeply concerned with RMA’s initial draft of the 2011 SRA and is proposing a number of changes to reduce the highly detrimental impacts of the RMA proposal.

The RMA proposal would substantially change the structure of the crop insurance program, resulting in an estimated reduction in funding of approximately $800 million per year over the next five years. This $4 billion cut is in addition to the $6.4 billion cut mandated by the 2008 Farm Bill.

“These are pretty dramatic cuts based on little or no supporting research and data,” said Bob Parkerson, President of National Crop Insurance Services. “The industry supports thinking about change, but it has to make sense for the Government, industry and producers.”

NCIS, which represents the private companies who sell and service crop insurance policies to America’s farmers and ranchers, presented their comments to the USDA/RMA today.

There are several areas of concern for the industry:

  1. Overall funding reductions implied by the draft 2011 SRA are excessive and unacceptable to the industry. Various proposals to reduce Federal spending on crop insurance have been made over the past few years, including the President’s 2010 Fiscal Year budget reduction of $5.2 billion, which was rejected by Congress. Now, through discretionary action, RMA proposes to implement the largest funding cuts ever for the industry.
  2. Cuts in payments to deliver the program and in underwriting gains are excessive and will reduce industry returns well below the long-term average, sharply reducing the incentives companies have to maintain investments in the industry in order to adequately service all producers.
  3. Severe funding reductions will impair many of the 15 private insurance companies, especially the small and medium-sized ones. This is likely to lead to more consolidation among the already shrinking industry and cause many of the 18,000+ jobs associated with this industry, many in rural America, to be lost.

In addition to the proposed cuts, the private industry has estimated, on a preliminary basis, additional costs of over $100 million to comply with RMA’s new program initiatives and information technology requirements.

  1. RMA proposed cuts also apply to the USDA-designated “Underserved States.” The cuts in delivery payments will more than offset the RMA proposed underwriting gain in those 16 states, thus reducing incentives to write and service producers there. Companies already operating in these states have low returns there and would now have a powerful incentive to withdraw. There is no mandate to keep taking losses in these states, thus opening the door to a lack of service in these areas.

“We truly hope that USDA and RMA will be willing to sit down with us soon and go through a true negotiation process for this SRA, “said Parkerson. “The Industry has many good ideas to offer, based on years of analysis, much of it by third party accounting firms. I know we can work this out to the benefit of all interested parties without wreaking havoc with a public/private partnership that has been working the way Congress intended for it to work for the last 30 years.”

The Federal Crop Insurance Program:

The crop insurance industry insures over 272 million acres and protects $90 billion in America’s food supply.  Over 80 percent of the insurable acres are protected.  Crop insurance is the key to financial stability for farmers, enabling farmers and ranchers to supply food and fiber to our country despite severe weather and other challenges that impact their business.

The federal crop insurance program is a public-private partnership, the industry and federal government work hand in hand.  The crop insurance program is available to all producers on an equal basis and provides the financial stability for farmers and ranchers, including access to capital.

National Crop Insurance Services

National Crop Insurance Services National Crop Insurance Services (NCIS) is an international not-for-profit organization representing the interests of more than 20 crop insurance companies. NCIS member companies write Crop-Hail Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk management program; and, privately developed crop insurance products totaling approximately $9 billion in premium, with liability totaling approximately $80 billion. These companies service all farmers participating in the federal program, including limited-resource and socially-disadvantaged farmers. In partnership with the government, these private companies are the safety net that equitably provides risk management to the American farmer. NCIS members range in size from one-state companies to national writers, as well as foreign company members.

###

Crop Insurance Protects Freeze-Damaged Crops in Florida Against Coldest Temperatures in 20 Years

FOR IMMEDIATE RELEASE
January 12, 2010

Producers with damage urged to contact agent

 

OVERLAND PARK, KANSAS..Florida has just over $3 billion in liability in crop insurance on crops ranging from citrus and citrus trees to nursery and fresh market tomatoes. “All of it is protected against the record freeze that hit this past weekend, and those producers who suffered losses can rest assured that crop insurance indemnities will be paid timely,” said Bob Parkerson, President of National Crop Insurance Services.

If producers think they have a loss on an insured crop, they must:

  1. Notify their crop insurance agent within 72 hours of the initial discovery of damage;
  2. Continue to care for the crop and protect it against further damage, if possible; and,
  3. Obtain consent from the insurance company prior to destroying any of the insured crop.

“There are other requirements that insureds need to follow that can be found in their specific policy,” said Parkerson. “But these three are key for right now.”

The Federal Crop Insurance Program:

The crop insurance industry insures over 272 million acres and protects $90 billion in America’s food supply.  Over 80 percent of the insurable acres are protected.  Crop insurance is the key to financial stability for farmers, enabling farmers and ranchers to supply food and fiber to our country despite severe weather and other challenges that impact their business.

The federal crop insurance program is a public-private partnership, the industry and federal government work hand in hand.  The crop insurance program is available to all producers on an equal basis and provides the financial stability for farmers and ranchers, including access to capital.

National Crop Insurance Services

National Crop Insurance Services National Crop Insurance Services (NCIS) is an international not-for-profit organization representing the interests of more than 20 crop insurance companies. NCIS member companies write Crop-Hail Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk management program; and, privately developed crop insurance products totaling approximately $9 billion in premium, with liability totaling approximately $80 billion. These companies service all farmers participating in the federal program, including limited-resource and socially-disadvantaged farmers. In partnership with the government, these private companies are the safety net that equitably provides risk management to the American farmer. NCIS members range in size from one-state companies to national writers, as well as foreign company members.

###

Crop Insurance Scores Well in Profitability and Effectiveness Analysis

FOR IMMEDIATE RELEASE
October 8, 2009

Independent study by Grant Thornton LLP shows that Federal Crop Insurance Program compares favorably to property and casualty industry

 

OVERLAND PARK, KANSAS..A study released today by National Crop Insurance Services shows that over a 17 year period (1992-2008) the Federal Crop Insurance Program has been significantly less profitable than the Property and Casualty (P&C) insurance industry, is riskier than the Property and Casualty industry, and has consistently lower expense-to-premium ratios.

The analysis is the 2009 update of a study originally prepared in 2007 to respond to a critical report released by the General Accountability Office (GAO). The Multiple Peril Crop Insurance (MPCI) program is a public-private partnership jointly managed by 15 designated private companies and the Risk Management Agency (RMA) of the United States Department of Agriculture (USDA).

“One of the key elements of the analysis was that crop insurance averaged 14.2 percent per year in pre-tax net income over the period 1992-2008 whereas the property and casualty industry saw an average annual profitability of 17.5 percent,” said Robert Parkerson, President of National Crop Insurance Services, a trade association for the industry. Moreover, the report concludes that providing MPCI coverage entails greater risk than P&C.

The Grant Thornton update also addresses the issue of administrative and operating (A&O) expense reimbursements. Unlike P&C insurance, MPCI premiums do not include the insurer’s cost of delivering the program. Instead, MPCI program delivery costs are compensated by the Federal government via an A&O reimbursement paid on behalf of farmers. Under the arrangement with the RMA, MPCI companies expect to receive full reimbursement for their A&O expenses. However, in 2008, total expenses equaled 22.1 percent of gross premiums while A&O reimbursements totaled only 20.4 percent, resulting in a shortfall of $160.8 million. The report also examines the impact of further cuts in A&O reimbursements imposed by the 2008 Farm Bill effective for the 2009 year and discusses aspects of the legislation which will result in delayed reimbursement of A&O and underwriting gains starting in 2011 and 2012.

The study also compares the expense ratios of the MPCI program to those of the P&C industry. In each of the past ten years, the total expense to gross premium ratio for the MPCI program has been under 29 percent. For the past three years, the expense ratio has been under 25 percent, reaching a record low of 22.1 percent in 2008. Expense ratios for MPCI are substantially less than expense ratios for the P&C industry when put on a comparable basis.

The Risk Management Agency recently released a report prepared by Milliman, Inc., on the historical rate of return of the crop insurance program. “Once we have had an opportunity to thoroughly review the findings from that study and compare it to the results of the Grant Thornton report, we will release our analysis and provide more information to the public,” said Parkerson.

At this time, the private insurance companies and the Risk Management Agency are in the initial stages of renegotiating the Standard Reinsurance Agreement, which provides the financial framework for the private industry’s participation in the program. RMA’s financial integrity provisions impose stringent surplus requirements on MPCI companies. These requirements ensure that adequate resources will be available in the event of extreme or catastrophic weather events. With the additional regulatory oversight at the state level, the Federal crop insurance program is one of the most regulated insurance programs in the world. “The crop insurance industry is on strong financial footing, and we would like it to remain that way” said NCIS President Bob Parkerson. “Crop insurance is at the center of the farm economy – a strong crop insurance program benefits a much broader community than just farmers and ranchers. If you appreciate the low cost of food in this country, you can thank the crop insurance industry for bringing some stability to America’s agricultural industry,” added Parkerson.

NCIS is an international non-profit organization representing the interests of the private insurance companies that provide crop insurance and risk management tools to America’s farmers and ranchers.

###

Producers with Grain Quality Questions Urged to Contact Crop Insurance Agents and Companies

FOR IMMEDIATE RELEASE
September 28, 2009

OVERLAND PARK, KANSAS…National Crop Insurance Services (NCIS) is urging farmers with grain quality concerns to contact their crop insurance agent or company to determine coverage options in case of damage to crops from disease, weatherrelated events, or other causes.

“While we, like everyone, are closely monitoring the mycotoxin situation and potential frost,” said Bob Parkerson, President of NCIS, “the key to protection is being proactive. Our job is to ensure that farmers have what they need to make informed decisions so that they can manage their risks and go about the business of farming.”

Part of the information farmers need to understand is exactly what quality adjustment is under the Federal crop insurance program. NCIS is providing some general guidance on quality adjustment, but stresses that since details vary, farmers should contact agents and companies directly.

Quality adjustment is a process that reduces the quantity of mature production when it meets the requirements provided in the crop’s policy provisions. This adjusted production to count is used for indemnity and actual production history purposes. Corn, Grain Sorghum, Soybeans, Sunflowers, Barley, Rye, Wheat, Canola, Flax, Oats, and Safflowers are grain crops that have additional quality adjustment statements in the Special Provisions of Insurance, which are a part of the crop’s respective county actuarial documents. The crop policy and the special provisions lists the types and levels of quality deficiencies that are covered, describes how and under what circumstances the various discounts will be applied and specifies who must obtain the samples and who can perform the determinations.

For example, the quality (excluding mycotoxins) of the grain for Crop Insurance purposes may be determined by:

  • A grader licensed under the United States Grain Standards Act or the United States Warehouse Act (USWA);
  • A grader licensed under State law and employed by a warehouse operator who has a storage agreement with the Commodity Credit Corporation (CCC); or
  • A grader not licensed under State law, but who is employed by a warehouse operator who has a commodity storage agreement with the CCC and is in compliance with State law regarding warehouses.

For substances or conditions injurious to human or animal health (mycotoxins), samples must be analyzed by an approved laboratory that:

  • Is a disinterested third party;
  • Performs quantitative tests that are certified by Federal Grain Inspection Service (FGIS); and
  • Is a recognized commercial, governmental, or university testing laboratory.

For certain mycotoxins, such as aflatoxin, representative samples of the grain must be taken before the grain is moved into commercial or on‐farm storage.

Policyholders should contact their crop insurance agent or insurance company if they have questions about their crop insurance coverage or responsibilities.

National Crop Insurance Services (NCIS) is a nonprofit trade association representing all of the private insurance companies who sell and service Federal crop insurance policies.

###

Multiple deadlines facing farmers; Fall crop insurance decisions due

FOR IMMEDIATE RELEASE
September 8, 2009

This release affects 41 states, with the exception of: Arizona, Alaska, Connecticut, Hawaii, Maine, Massachusetts, Nevada, Utah and Vermont.

OVERLAND PARK, KANSAS…This is the time of year when farmers face multiple deadlines. They are harvesting their spring planted crops and, depending on the yield and revenue potential, they may need to consider the basics of how to report damage to their crop insurance agent. At the same time they are also making their crop insurance decisions for fall planted crops.

September 30 is the deadline for producers to sign up for federally subsidized crop insurance coverage on fall-seeded crops like winter wheat, barley, oats, and forage production.

Meanwhile, the combines are bringing in the corn harvest, with soybeans soon to come.

Producers should check the yield and revenue potential of their spring planted crops. Remember, it is very important to follow the crop damage reporting requirements if a loss is anticipated. The first one to know is that insurance policies require written notice be given to your crop insurance agent, by crop, and by unit/farm, if you suspect there is a loss. This must be done within 72 hours of discovery of damage or loss and 15 days before harvest begins.

The most important thing to remember is “Don’t destroy the evidence of damage until a loss adjuster evaluates it!”

For more information, contact a crop insurance agent and don’t forget the September 30 deadline for fall planted crops. Not all crops or all types of policies are available in every state or county so find a local agent for help in determining what works best for your risk management needs.

###