NU Online News Service, June 16, 3:15 p.m. EDT
Agent associations have joined the National Crop Insurance Services’ (NCIS) criticisms of the Obama administration’s decision to cut the federal crop insurance program by $6 billion over the next 10 years.
Two national agent associations said today that the cuts could have negative effects on the future of the program.
The U.S. Department of Agriculture said last week that $2 billion of the planned cuts will be used to “strengthen successful, targeted risk management and conservation programs,” and the remaining $4 billion will go to reduce the national deficit.
Aside from some named perils–such as crop hail–coverage for crops is provided under a public/private partnership that was arranged in 1980. Rates are set by the government, risk is shared by the government and private insurers, and insurers are reimbursed for the costs of delivering insurance.
The Independent Insurance Agents & Brokers of America said in a statement that on top of the $6 billion in cuts, the final Standard Reinsurance Agreement (SRA) released by the Risk Management Agency (RMA), which administers the crop insurance program, puts an 80 percent cap on agent commissions.
The SRA, IIABA said, determines the terms and conditions for Administrative and Operating (A&O) reimbursements the government provides to crop insurance companies. The agent association said the new SRA caps company expenditures on agent commissions at 80 percent of the A&O subsidy.
“In an unprecedented move, this represents the very first time that RMA has attempted to directly regulate agent crop insurance commissions rather than allow the marketplace to determine the appropriate commission,” IIABA said.
Robert Rusbuldt, IIABA president and CEO, said, “The $6 billion cut to the crop insurance program, coupled with the outrageous command and control commission cap proposal, will have a compromising and destabilizing effect on the program and its intended beneficiaries–farmers and ranchers. In light of the current economic problems, especially in rural America, these proposals will exacerbate an already ravaged farming economy.”
The National Association of Professional Insurance Agents (PIA) was equally critical of the new SRA. “Cuts of this magnitude, as proposed in the final SRA, are a threat to our nation’s farm safety net, all in the middle of one of America’s worst economic recessions,” said Dan Weber, chairman of the PIA National Crop Insurance Working Group.
He noted that these cuts would be on top of $6.4 billion in cuts made to the program in 2008, and a letter PIA distributed to its members, obtained by NU Online News Service, adds that many of the 2008 cuts have yet to be implemented.
Cuts of this magnitude will have a compromising and destabilizing effect on the program and its intended beneficiaries,” the letter states.
A spokesperson for the U.S. Department of Agriculture did not return a phone call.