Crop 1 Disputes IIABA Claims
By Mark E. Ruquet
NU Online News Service, April 22, 4:01 p.m. EDT ? Crop 1, the managing general agent that finds itself at odds with the Independent Insurance Agents & Brokers of America over Internet sales of crop insurance, disputed the associations claims that it is out to ruin independent agents.
Gene Grimsley, senior vice president of administration for the Des Moines, Iowa, MGA, denied the Alexandria, Va.-based agent association's charge that Crop 1 is attempting to undercut agent commissions and circumvent agent participation in the program.
"We have addressed the issues raised and they have been signed-off on by state regulators and [the Federal Crop Insurance Corporation]," said Mr. Grimsley.
Crop 1′s program, known as a premium discount plan (PDP), utilizes the Internet to save money in administrative costs. These savings are passed on to the farmer, said Mr. Grimsley, in the form of reduced premiums.
It is not a rebate program, he said, and both state and federal regulators have reviewed the program to ensure that is the case.
Agents do receive less commission, he said, but the sales force is primarily geared at small agents who would normally not be able to handle many accounts.
Through the advantages gained using the Internet, he said, the producers would be able to pick up the percentage of loss in commission by increasing their volume of accounts.
Mr. Grimsley said the idea behind the program is to eventually put the farmer in the position of managing the information for himself, with the agent keeping an eye on the account and stepping in when the client needs help.
"Once the policy is set up, it's not real hard for the farmer to follow," Mr. Grimsley said.
Generally, Crop 1′s premiums are five to 10 percent less than through other primary insurers. Converium Insurance North America Inc., formerly Zurich Re headquartered in Zug, Switzerland, is the underwriter for the program.
There are no existing books of business for Crop 1, the MGA pointed out in an additional statement furnished by Mr. Grimsley. No agents are being forced to convert existing books to this program, thereby suffering unwanted commission reduction.
The provider also uses licensed agents in its service. Information is made available through cooperatives, farm lending institutions and farm service centers, but farmers are directed to agents when they have policy questions or are seeking the underwriting.
"It is fair to say that we are providing an opportunity for savings that no one else has," said Mr. Grimsley.
The IIABA has appealed the approval of the PDP to the USDA National Appeals Division (see NU Online News Service, April 21). It said it would take additional legal action against FCIC if it fails in its appeal.
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