Amendment Defunding Crop Insurance Plan Included in Agriculture Bill

October 26, 2005

An amendment defunding Premium Reduction Plans (PRPs) was included in an agriculture bill today, an effort the Independent Insurance Agents & Brokers of America (the Big “I”) sought out because of various issues the association says it believed were contrary to the best interest of consumers

The Kingston-Boyd provision would go into effect on July 1, 2006, the start of the 2007 reinsurance year. The provision will not interfere with the 2006 reinsurance year, which ends June 30, 2006, thus guaranteeing that no farmers will have to worry about previously purchased coverage.

The United States Department of Agriculture’s Risk Management Agency (RMA) has published an interim rule allowing providers to give rebates to their customers, a provision at odds with the laws of 48 states, an unprecedented departure from longstanding Federal Crop Insurance Program (FCIP) regulations prohibiting rebating.

“If rebating is allowed under Premium Reduction Plans, insurance providers would be forced to focus on cutting corners rather than providing quality service and better risk-management products for farmers,” said Norm Nielsen, Big “I” Crop Insurance Taskforce chairman and president of Associated Insurance Counselors Inc. in Preston, Iowa. “This fundamental shift away from service-based competition for the crop insurance business of farmers, unheard of in the Federal Crop Insurance Program, would force insurance providers into a race to the bottom, cutting back on service for America’s farmers. That is why lawmakers in 48 states have enacted laws against the practice of rebating.”

In addition to the inherent problem of cutting service, there is also the problem that the PRP rebating scheme allows for rebates to be offered to farmers in some states but not in others. The existing FCIP does not allow discrimination in favor of farmers in one state over farmers in another state, but the PRP scheme would violate that principle.

“The PRP proposal is a dangerous shell game under which farmers in some states stand to be short-changed in order to pay rebates elsewhere,” said Patrick O’Brien, Big “I” director of federal government affairs. “This opportunity for discrimination must not be allowed. We are very pleased that the Kingston-Boyd amendment has been included in the final agriculture spending package, and we look forward to its enactment as part of the government’s fiscal year 2006 budget.”

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