Insurance Agents Angry Over U.S. Crop Program Changes

NU Online News Service, March 1, 12:50 p.m. EST

WASHINGTON–Crop insurance carriers and independent agents say the U.S. Agriculture Department's latest proposed cuts in subsidies in the program as well as a "soft cap" on agents' commissions are both unwarranted and hurtful.

The concerns are arising despite a revised offer by the USDA's Risk Management Agency to reduce the proposed cuts in the program from $8.4 billion to $6.9 billion, an 18 percent change from the earlier proposal.

Insurance industry representatives called it a disappointing effort that would discourage participation in the program.

The latest RMA counterproposal is part of negotiations with the National Crop Insurance Services (NCIS), which represents the 16 crop insurance carriers in talks with the Agriculture Department.

The agency is proposing the cuts in part because of strong political pressure to shift funds from the farm program to the Agriculture Department's child nutrition programs.

Bob Parkerson, president of the NCIS, voiced disappointment with the latest RMA proposal. The RMA's Feb. 23 proposal was made in response a counteroffer by the NCIS in January to the RMA's first proposal, made in December.

In response to the RMA's initial demands for an $800 million annual cut over 10 years in the program, the NCIS submitted a lengthy paper outlining ways the industry could reduce the subsidies without threatening the solvency of the carriers.

Mr. Parkerson said RMA's latest offer is being met "with dissatisfaction and disappointment from the industry."

He said the $6.9 billion would reduce financial support to the crop insurance companies by some 25 percent, and as was the case with RMA's first proposal, "these cuts would continue to put at risk the depth and scope of crop insurance services in many agricultural areas of the country."

He added that NCIS "is disappointed that RMA didn't give much credence to our suggestions about ways to streamline and improve the important tasks that we must undertake to implement the program and protect its integrity in compliance with the provisions of the SRA."

In fact, he added, "RMA went the other way, making these tasks more cumbersome and expensive, while simultaneously calling for huge funding cuts."

At the same time, the Independent Insurance Agents and Brokers of America sent a letter to the agency criticizing the decision to impose "soft caps" on agents' commissions as part of the cutbacks.

Charles Symington, IIABA senior vice president of government affairs, said in the letter that the "IIABA believes that limiting marketplace competition for agents who provide high-quality customer care to their clients will result in a decline in the efficient and effective delivery of services, as well as lead companies to set a standard commission rate."

Mr. Symington said the proposed changes on agents' commissions would serve as a disincentive for agents to write policies in high risk parts of the country.

Moreover, he said by placing arbitrary caps on agent commissions, "RMA is contradicting Congress' intent of providing widespread availability of crop insurance to farmers across the country."

Mr. Symington noted that approximately 18,000 agents across the country sell crop insurance.

"During a time of great economic strain and instability, it seems imprudent to slash a program which has helped rebuild America's farmland," Mr. Symington said.

"The IIABA is greatly concerned that this cap would eliminate the essential aspects of competition and service incentives that are vital to the crop program," he said.