Apparently the Risk Management Agency (RMA) believes that crop insurance agents might be overpaid and plans on slashing the Administrative and Operating (A&O) subsidy by 30% in the new Standard Reinsurance Agreement (SRA). The SRA, which is the financial and compliance contract between the government and the private insurance companies that operate the crop insurance program, includes reimbursement to compensate the private companies for the costs associated with selling and servicing crop insurance policies, including agent commissions. The amount of the reimbursement is based on a percentage of the premium received by the companies, regardless of how much its actual expenses are. A cut of this size would significantly erode agent compensation.
Even if you don't write crop insurance, this is an example of the federal government making a decision that will directly affect agent compensation. With all of the insurance-related bills that Congress is now considering, this is not a road that any agent should allow our federal government to go down without a fight. That's why PIA National is asking all PIA members to contact their Members of Congress asking them to stand-up to the White House and USDA/RMA on this issue. Please click here to send a pre-written, fully-editable letter to Congress now.
Here's the nitty-gritty:
In addition to the $6.4 billion cuts in the 2008 Farm Bill, RMA is now proposing an additional $4 billion cut. The current SRA draft amounts to the largest cuts ever attempted by any Administration in the history of the crop insurance program!
This is an assault on your job and on our farm safety net, all in the middle of one of America's worst economic recessions. If this draft SRA moves forward with the 30% cut, it would push the average AO allowance down to an average national reimbursement rate of 12.2 percent from the pre-farm bill level of 20.5% and the current level of 17.9 percent for 2009. These reductions would have a direct impact on agent compensation. For example, Kansas will see a 43% cut in their A&O (18.6% down to 10.5%). In 2009, the state had almost $727 million in premiums and at an A&O rate of 18.6%, it resulted in a $135 million dollar payment. If the proposed rate was actually implemented this year, they would have only seen a payment of $76 million (a loss of $59 million!). That loss of money would have had a direct hit on the agent.
The proposal includes creating a new maximum price for the payment of A&O on the basic crops that account for over 70% of the crop insurance premium. The prices per bushel are corn ($2.56), wheat ($3.92), soybeans ($6.36), grain sorghum ($2.43), and barley ($2.93). The price per pound is $0.52 for cotton and $.0.083 for rice. The price on which A&O is paid could go below this number, but never above!
This is an insult to America's crop insurance agents. It's imperative that you let Congress know that you won't stand for this. Click here to send a pre-written, fully-editable letter to Congress asking your representatives to stand-up to the White House and USDA/RMA. |
