Government Shutdown's P&C Impact: Crop Insurance Claims Handling

Uncertainty in the handling of crop insurance claims will likely be the primary impact of the overnight partial shutdown of the federal government.

The industry is working with a shuttered U.S. Department of Agriculture on what to do if the shutdown extends for more than a few days, according to officials of the Independent Insurance Agents and Brokers of America.

Charles Symington, senior vice president of external and government affairs for IIABA notes that, depending upon the length of the shutdown, the claims adjustment notification process, the timeline for claims payments, and business transactions with the Risk Management Agency (RMA) may be affected.

"The approved crop companies are currently working with the RMA on contingencies should the shutdown extend longer than a few days," Symington says.

The Crop Insurance Program will continue in force even though a dispute over food stamps has held up enactment of legislation reauthorizing farm-support programs and providing appropriations for them.

Symington notes that the farm bill funds the Federal Crop Insurance Program (FCIP) through the end of the year. He says, "The expiration of the current farm bill extension will not have any immediate impact on the crop program."

However, Symington says the continued inability to reach a long-term compromise on a farm bill has led to uncertainty in the agriculture marketplace.

Moreover, "Today at noon the U.S. Department of Agriculture (USDA) shuts down except for essential staff, which includes only political appointees," he says

The National Flood Insurance Program will continue in operation despite the government shutdown, according to Dan Watson, a spokesman for the Federal Emergency Management Agency, which administers the program.

"In the case of a lapse in annual appropriations, FEMA, which administers the NFIP at the direction of Congress, will continue to pay out claims, write new policies and operate the NFIP with existing funds," Watson says.

NFIP will continue in operation because it is funded by premiums, not by Congress.

The Department of Health and Human Services, which administers "Obamacare," the Patient Protection and Affordable Care Act, which is at the heart of the conflict over funding the government, issued a statement at 9:25 a.m., stating that the exchanges "are open for business."

With most insurance handled at the state level, the impact of the shutdown on the rest of the insurance industry will be minimal, although 800,000 federal workers are being furloughed, while an additional 1 million will be working but with the understanding that it is unclear when they will be paid.

Members of Congress are being paid, but their staffs are not. Some congressional staffers worked until after 1 a.m.—some waiting for a possible breakthrough while others worked on press statements drafted in anticipation of a shutdown.