More Cuts Proposed For Crop Insurance

NU Online News Service, Dec. 30, 10:47 a.m. EST

WASHINGTON--Proposed cuts in the crop insurance program are sending alarms through the insurance industry for both underwriters and agents.

Under a proposal unveiled earlier this month, the Obama administration wants new cutbacks in the program that in addition to other recent action, would collectively reduce government involvement in the program by close to 30 percent.

"We definitely cannot live, without a doubt, with what they have suggested," said Robert Parkerson, president, National Crop Insurance Services, the liaison to the U.S. Department of Agriculture's Risk Management Agency (RMA). RMA represents the 16 carriers that provide crop insurance to an estimated 270 million acres of all crops grown in the U.S., an estimated 78 percent of all tillable land. The group also helps develop policies, claims procedures, research on new plants and new genetic seed processing for the agriculture industry.

"If this isn't resolved, we have a tremendous problem on our hands, and so does the nation's farmers," Mr. Parkerson added.

Besides the cut in the program subsidy, the RMA is also raising the rates to the NCIS member companies for reinsurance, which could jeopardize the solvency of the 16 NCIS companies that also purchase it on the private market, Mr. Parkerson said.

"The current draft of the standard reinsurance agreement is out of touch with the reality of the costs necessary to keep the FCIP [Federal Crop Insurance Program] a viable safety net for America's farmers," added Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America.

Their concerns stem from a proposal made within the last two weeks by the RMA that would cut $4 billion over 5 years in the crop insurance program. Last year, Mr. Parkerson said, crop insurers had a loss ratio of about 88 percent out of $9.8 billion in premiums paid.

According to various officials, the Obama administration wants to use the funding cuts from the crop program to increase the Agriculture department's child nutrition programs by at least $1 billion a year over the next 5 years.

The child nutrition programs include the school lunch and breakfast programs; the women, infants and children's special nutrition program, or WIC; and commodity distribution programs.

Another concern is that the administration might be trying to link the nutrition programs to the crop insurance programs, foreshadowing additional cuts, according to congressional staffers and lobbyists. They cannot be directly linked, these officials say, because Congress has no direct control over NCIS member companies.

The new $1 billion annual cut would be in addition to the $6.4 billion cut in the program over 5 years negotiated in the 2008 farm bill, bringing total cuts over the last few years to 27 percent.


Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Unit used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.