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.