NU Online News Service, March 19, 12:16 p.m.EDT

Insurance companies and agents joined together Thursday inasking Congress “to do no harm” to the existingcrop-insurance-subsidy program, citing concerns withObama-administration proposals that call for further cuts.

In written testimony given on behalf of the IndependentInsurance Agents and Brokers of America, Ruth Gerdes, president ofAuburn Agency Crop Insurance, Inc., Auburn, Neb., offered strongsupport for a robust farm-safety net and spoke out againstadditional cuts to the Federal Crop Insurance Program (FCIP) in theupcoming Farm Bill negotiations.

Gerdes said, “Do no harm to the crop-insurance program alreadyin place.”

Steve Rutledge, chairman of Farmers Mutual Hail InsuranceCompany of Iowa,West Des Moines, Iowa, added that “cropinsurance should remain the core risk-management tool, and we arecommitted to the public-private partnership of program delivery,which directly supports more than 20,000 private-sector jobs acrossthe country.”

Gerdes and Rutledge made their comments at a Senate AgricultureCommittee hearing on the 2012 farm bill, which would governfederal-agricultural policies, subsides and rules goingforward.

The new farm bill would replace legislation enacted in 2008. Theauthorization for that legislation expires Sept. 30.

The omnibus legislation serves to reauthorize such programs ascrop insurance, specialty crops, conservation, foreign agricultureand food aid, farm loans, energy and forestry, Title IV nutritionprograms, Title I and the SIRE Program, research programs,subsidies, dairy programs, and rural development.

Gerdes and Rutledge testified amid industry concerns that the next farm bill wouldincorporate provisions of the 2013 farm-program-budget proposalsoutlined last month by the Obama administration.

In addition to cuts in the 2011 standard reinsurance agreementnegotiated with the Agriculture Department, rating-methodologychanges recently implemented are expected to impose further cuts inthe crop-subsidy program.

Under the Obama administration's proposal, subsidies for theindustry would be cut by $8 billion over 10 years. This is inaddition to the $6 billion in cuts over 10 years contained in acontract with underwriters that went into effect last year.

Private companies' subsidies for administrative and operatingexpenses would be reduced to $300 million annually, to $900million. Under the contract signed in 2011 with the industry by theAgriculture Department, subsidies for administrative and operatingcosts were reduced to $1.2 billion.

The administrative and operating cost budget is also used to paycommissions to insurance agents who sell the products.

The 2013 budget proposal would also reduce the return oninvestment for crop insurers to 12 percent from the current 14percent, and it also calls for reducing producer-premium subsidiesby 2 basis points, or two-tenths of a percent.

In her testimony, Gerdes talked about the shift of the cropprogram from a public to a private-delivery system, and noted thatthe efficiency of program delivery by agents and the expansion ofinsured acres could never be replicated by a government agency. Shesaid that in 2011 there were 18,000 crop agents servicing 1.15million policies. “The growth and overall success of the FCIP isdue to motivated program participants, good lawmaking, qualityproducts and a dedicated agent force,” Gerdes said.

Rutledge testified that the crop-insurance-delivery system iscurrently “in a unique situation.”

He said companies are still processing and delivering recordpayouts to farmers and ranchers for their 2011 losses. At the sametime, crop prices remain elevated far above historic levels, andprojections show that farmers will continue to take advantage ofthat and push themselves to plant to capacity, he said.

“This indicates [that] the need for crop insurance is likely torise, as will insurers' risk exposure,” Rutledge said. “With thisgrowth comes an increasing sensitivity to additional changes to theprogram and the delivery system—because the industry'sadministration and organizational infrastructure continues to bepushed to the limit,” he said.

Updated to clarify that Ruth Gerdes' testimony waswritten.