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Crop Insurance Commissions Are Already Too Tight

More premium discounts could trigger discrimination and eroding service.

John Otte 1, Economics Editor

May 12, 2005

2 Min Read

On Monday, a Congressional subcommittee will vote on whether to place a moratorium on crop insurance premium discount plans. The vote will determine whether companies who can demonstrate cost savings to USDA's Risk Management Agency will be able to compete on price.

Crop Insurance Professional Agency, LLC is pushing for the moratorium. "It is a group of independent agents working together for the betterment of the crop insurance industry, through both education of our members and through our political efforts in Washington D.C.," says Shannon L. Moore, The Agency in Montezuma, Inc., Montezuma, Kansas.

Crop1, based in Des Moines, Iowa, is currently the only crop insurance company USDA's Risk Management Agency has authorized to sell federally subsidized crop insurance products to farmers at a premium discount.

Cherry picking customers

"We have found that contrary to what Crop1 is saying, the small farmers are not being serviced by Crop1," says Moore.

"What we have found as an organization is that when we find Crop1 in our area, they're not even attempting to approach the smaller mom and pop farmers," explains Moore. "They're going after the large farmer because that's where they have to concentrate in order to make the premium discount work. As a result the farmers who will be left for the industry to service will be small mom and pop farms and landlords who have a lesser interest.

"You're not supposed to discriminate when you're working with the federal government," she adds. "That's just a given."

"As agents, we have to offer the same products to all customers," says Moore. "We can't discriminate either.

"If an agent is offered, and accepts, a contract to sell Crop1, the agent is required to offer Crop1 to all of the agent's insureds," explains Moore. "Since Crop1 is not in all states, an agent who does business in states where Crop1 is not available cannot offer it to all customers. That's also discriminatory.

Agent commissions get squeezed

"One way Crop1 is achieving part of its premium discount is via agent commissions," notes Moore. "In order to sell the premium discount plan you have to take another cut in your commission.

"We've taken cuts year after year after year," adds Moore. "I've been in this business 11 years. The government keeps putting more paperwork on agents and then trimming subsidies.

"If companies choose to sell a premium discount plan, they'll have to cut commissions to agents further," she adds. "It is getting to the point that we're going to have to hand it back to the government because it is getting too expensive for us to service it."

Other insurance companies have applied to offer premium reduction plans. However, RMA has denied those PRP applications pending a review of the impact of PRP.

Independent crop insurance agents are not the only insurance agents supporting a moratorium on PRP. Some banks and Farm Credit System lenders also sell federally subsidized crop insurance and support a moratorium.

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