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Corn+Soybean Digest

Insurance Programs Evolve

If you brushed up on crop insurance basics in 2004, the good news is you won't need much of a refresher in 2005. However, as always, there are several bits of news worth further review.

Premium Reduction Plans

For years it had been generally accepted that crop insurance is priced the same no matter where you buy it, because the government dictates programs and rates. For the past three years, however, there has been one exception: Premium Reduction Plans.

According to Risk Management Agency Deputy Administrator Tim Witt, companies can present proposals to the Federal Crop Insurance Corporation (FCIC) that demonstrate how they can effectively generate savings through efficiencies in administering the crop insurance program. If approved, they are allowed to pass those savings to producers.

Witt says Crop1 Insurance is the only company currently approved to offer this type of plan. Several other proposals were recently presented to RMA for consideration but none were approved.

Billy Rose, Crop1 CEO, says producers receive up to a 10% savings in premiums because, “We built a strong IT (information technology) platform and we do a lot of our business electronically through our affiliate agents.”

Roger Black, crop risk manager for Pelgrow in Atlantic, IA, backs Rose's claim and says his two years of experience with the program have been positive. Black confirms Crop1 claims of average savings of 7½ to 8% and says all his customers used these policies in 2004.

The Crop1 program is rapidly becoming more widely available.

In addition, Rose says Crop1 has added a minimum of 100 agents per year in the field who offer the program and there are now 357 agents selling it. Details on the program and an agent locator are available at

Product restructuring progress?

There seems to be agreement among agents, growers and regulators that there are too many products available and some simplification is necessary.

Paul Horel, president of the Crop Insurance Research Bureau says, “In a very real sense, maybe the most daunting task that farmers face relating to crop insurance is simply choosing the right product.”

A year ago, The Corn And Soybean Digest reported progress was being made, but now it appears it will be at least 2006 before meaningful changes are enacted.

“We have pursued developing a new revenue insurance product that combines attributes from the various products, and we actually are very close,” says Witt. “Sometime after the first of the year we'll have a proposed rule that combines four policies into one.” These policies include actual production history (APH), income protection (IP), revenue assurance (RA) and crop revenue coverage (CRC).

“Our goal is to get it in place for 2006,” he adds, but notes it will take time to get through the public comment period and address any issues raised during this period.

GRIP policies offered in additional states

The FCIC board voted to expand availability of the group risk income protection plan (GRIP) and GRIP harvest revenue option to additional states. Eligible counties were added in roughly 18 states for soybeans and 10 for corn. Check with your agent to determine availability in your county.

Soybean Rust

Soybean rust has now officially been identified in the U.S. and Witt says RMA is monitoring the situation.

In general, it does cover losses as a result of rust. However, growers must pursue reasonable preventive measures.

For example, growers need to follow good farming practices. If there are sufficient control measures available, but the grower elects not to use them, the loss won't be covered. If there are no effective control measures available or there are insufficient amounts of chemicals available for effective control, the resulting loss of production would be covered.

Standard Reinsurance Agreement

Earlier this year, the standard reinsurance agreement (SRA) was renegotiated, and budget cuts were made in such areas as expense reimbursement for companies who write crop insurance.

Horel says it's too early to tell what the repercussions will be from this reduction, but “in the past few weeks another long-time provider exited the business by selling its crop line to a competitor. Was the reason simply this most recent cut?” he asks. “Probably not, but certainly the sustained reductions and deteriorating profit picture factored into the decision.

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