Senators Eye Crop Ins. Changes

By Steven Brostoff

NU Online News Service, May 5, 12:30 p.m. EDT-- Washington--Proposed changes in the Standard Reinsurance Agreement relating to federal crop insurance could substantially weaken the program by reducing the number of participating companies, 15 members of the United States Senate said.[@@]

In a letter to Agriculture Secretary Ann M. Veneman, the senators said that the Agriculture Department's Risk Management Agency, which oversees the program, has not made a good case for provisions that would reduce the revenue for companies delivering crop insurance to farmers.

"Inevitably, some of these cuts would fall on agents, many of whom would leave crop insurance entirely or at least devote more of their effort to their more profitable lines of insurance," the letter read.

"Such steps would have the effect of reducing the quality of service to farmers, especially in states that are costly to operate in," the letter added.

Senators who signed the letter include leaders among both Republicans and Democrats. Democrats include John F. Kerry, D-Mass., the likely presidential nominee; Minority Leader Tom Daschle, D-S.D.; and Sen. Max Baucus, D-Mont., the senior Democrat on the Senate Finance Committee.

Leading Republicans include Chuck Grassley, R-Iowa, who chairs the Senate Finance Committee, and Rick Santorum, R-Pa., who chairs the Senate Republican Conference.

The proposed redraft of the SRA represents a major issue for insurance agents, said Patrick O'Brien, Washington representative and grass roots coordinator with the Alexandria, Va.-based Independent Insurance Agents and Brokers of America.

He said that IIABA is pleased with the letter and worked hard to encourage senators to sign it.

It underscores the real concerns IIABA has about how the RMA is handling the negotiations, he said. RMA, Mr. O'Brien noted, seems to view insurance agents as an "unnecessary evil" and appears to be redrafting the SRA as a way to squeezing agents out of the process.

Mr. O'Brien added that the White House doesn't realize the consequences this policy will have on farmers.

The letter from the senators said that SRA calls for cuts in administrative and operating expense reimbursement. In addition, the letter added, the proposed SRA calls for insurance companies to surrender five percent of their underwriting gains to RMA.

The letter said these moves are expected to produce $41 million in savings. However, the letter said, even under the existing SRA, most companies have not been recovering their expenses under the current reimbursement schedule and have had to rely on underwriting gains to produce even a modest profit margin.

The letter noted that the number of SRA holders participating in the program have already declined from 33 in 1991 to 14 in 2004. This suggests, the letter said, that "the current financial opportunities are not viewed as particularly attractive to insurance companies or other firms looking to diversify their portfolios."

If the reductions are implemented as proposed, the letter said, it is likely that the number of companies would fall still further, placing access to coverage in jeopardy in many states that are already unprofitable.

But in a prepared statement, RMA denied that the proposed changes would endanger insurance companies that deliver crop insurance.

"The cost efficiencies proposed by RMA are small and manageable," RMA said. "Some companies in the industry are currently living within or well below the government expense reimbursement. Others choose not to."

RMA noted it is ready at any time to work with insurance companies on ways to reduce administrative costs.

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Senators Eye Crop Ins. Changes

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