Dr. Laurence M. Crane
EXTENSION RISK MANAGEMENT EDUCATION
NATIONAL CONFERENCE
April 12, 2011
St. Louis Hilton at the Ballpark
St. Louis, Missouri


What is National Crop Insurance Services?
Overview of Crop Insurance
 Role of Government (USDA/RMA)
 Role of Private Sector
 Program Size and Program Components

Changes for 2011 Reinsurance Year
 Common Crop Insurance Policy
 Actuarial Information Browser (AIB)/ Cost Estimator
National Crop Insurance Services
 Not-for-profit “crop insurance industry” trade
association
 Members are crop insurance companies

 SRA holders (MP crop insurance companies)
 97% of all Crop Hail policies are written by an NCIS
member company
 International insurance and reinsurance companies

Licensed statistical agent

We (crop insurance industry) take very seriously
the responsibility we have as the delivery system
for the Federal crop insurance program.

Recognize the value of working with
others/educators in providing objective
educational information.


Crop losses tend to be correlated
Prevented commercial development of policies for
many years
 Companies cannot cover losses
 Producers cannot afford premiums

Catastrophic losses are the norm in crop insurance
Federal
Government
Private Companies
|
1930’s
|
1980’s
Privatization
|
1998
Today
 Today, Federal governments’ role:




Set policy, rules, and regulations
Subsidize premium
Provide reinsurance
Provide A&O reimbursement
A form of insurance for insurance companies
The objective is to remove some degree of financial
uncertainty by protecting themselves against
economic loss
 Enables insurance companies to plan more effectively
for contingencies


Farmers
Insurance Sales Agents
(Most agents work for more than one company)
Responsible for Sales and Premium Collection of the Farmer-paid Portion
Private Insurance Companies
Responsible for Reinsurance and Delivery of the Program
Contribute to Policy Development
Federal Crop Insurance Corporation (FCIC)
(Managed by USDA/RMA)
Responsible for Policy Development, Rating, Reinsurance, and Administrative Expense Support
(as negotiated and contracted by the Standard Reinsurance Agreement)
 RMA is the USDA agency that supervises and
administers the day to day activities of the Federal
Crop Insurance program
 Roughly 500 employees across the country
 RMA’s key functions
• Underwriting – policy design and maintenance
• Program rules and regulations
• Premium rates and crop price elections
• Data collection, auditing, and management
• Payment of reinsured companies’ reinsured losses and
Administrative and Operating (A&O) expenses
• Auditing and oversight of finances and market-behavior
Source: RMA
•
Responsible for 10 Regional Offices (RO’s) across the
country. The RO’s are RMA's eyes in the field,
keeping in close contact with local producers, grower
groups, universities, and other government agencies.
•
RO’s provide information on local pilot programs,
growing conditions, events, and program strengths
and weaknesses.
•
RO’s work closely with participating crop insurance
companies and agents.
Source: RMA
Contract between FCIC (RMA) and Approved
Insurance Providers (AIPs) to deliver Federal crop
insurance
 Renegotiated every 5 years
 Current contract began July 1, 2010

 [2011 reinsurance year]

Industry Advocacy
 NCIS serves as an advocate for the crop
insurance industry. Thus, members have an
organization that can provide the industry’s
side of any issue quickly, succinctly, and
authoritatively.

Advisory Organization and
Statistical Agent (Crop-Hail)
 NCIS collects, verifies and processes data from
the industry for preparing loss costs and for the
use in preparation of forms and procedures.
This pooled data is the foundation of crop
insurance loss costs and company rate filings.

Education and Training
 Promotes industry-wide education and training
standards by sponsoring schools and creating
training products that meet accreditation
requirements of both Federal and State
regulators. Members benefit from an increased
professional image.

Research and Product Development
 NCIS conducts a nationwide agronomic
research program, along with various specialpurpose research projects, and evaluates new
programs. NCIS research improves and
validates overall product and service lines and
provides credibility to standards and
procedures in both the MPCI and crop-hail
programs.
Crop-Hail Insurance Processing System
United States Premium & Loss Totals
2001 - 2010
800,000,000
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Prem
418,607,734 389,300,231 407,777,972 413,959,742 412,255,308 403,756,745 487,780,025 667,984,964 619,771,458 680,908,247
Loss
296,043,484 282,265,460 228,080,312 241,872,184 183,676,253 202,183,331 234,924,946 554,581,621 565,684,292 459,894,430
Crop-Hail Insurance Processing System
United States Loss Ratio Totals
2001 - 2010
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
LR
2001
70.72
2002
72.51
2003
55.93
2004
58.43
2005
44.55
2006
50.08
2007
48.16
2008
83.02
2009
91.27
2010
67.54
Multiple Peril Crop Insurance
All Industry Premium and Losses
1991 - 2010
PREM
LOSS
$12,000,000,000
$10,000,000,000
$8,000,000,000
$6,000,000,000
$4,000,000,000
$2,000,000,000
$0
CROPYEAR
Crop Insurance Total Liability
By Crop Insurance Type
2010
PERCENTAGE OF TOTAL LIABILITY
40%
38%
35%
30%
26%
25%
23%
20%
15%
10%
10%
5%
3%
0%
1%
IP
GRP
0%
MPCI
CRC
GRIP
CROP INSURANCE TYPE
RA
CROPHAIL
Multiple Peril Crop Insurance
Crop Insurance Total Policies Sold
2001 - 2010
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2001
2002
2003
2004
MPCI
CRC
2005
IP
2006
GRIP
2007
GRP
RA
2008
2009
2010
 Combines several (five)
policies that had similar
features into a single policy
 Revenue:
 CRC – Crop Revenue
Coverage
 RA – Revenue Assurance
 RA – Revenue Assurance with
Harvest price option
 IP & IIP – Indexed Protection
& Indexed Income protection
 APH -- (Actual Production
History)
RMA developed a single rating and pricing component so all insurance
coverage is consistent in insurance protection and cost to producers.
For the 2011 crop year, CRC, RA, IP, IIP, and APH
plans of insurance will no longer be available for:





Wheat
Barley
Malting Barley
Corn
Grain Sorghum





Soybeans
Cotton
Rice
Sunflowers
Canola/Rapeseed
For 2011, coverage for these crops will convert to either
yield protection or revenue protection according to the
RMA Insurance Plan Conversion Chart.

Carryover policies automatically
converted to plan closest to current
coverage - no new application required.

New insureds must select:
 Yield Protection
 Revenue Protection
 Revenue Protection with Harvest Price
Exclusion
Insured
Area
Plan
Group
Risk Plan
(GRP)
Group Risk
Income
Protection
(GRIP)
Note: Check special provisions of
insurance for Area Plan availability.
Individual
Plan
Yield
Protection
Revenue
Protection
(with High
and Low
Price)
Revenue
Protection
with
Harvest
Price
Exclusion
RMA deleted Group Risk Program (GRP) and Group Risk Income
Protection (GRIP) county crop program for corn, soybeans, grain
sorghum, cotton, and peanuts for the 2010 crop year in 1,062
counties, 752 of which have had no policies earning premium for the
2009 crop year.
 Corn—469 counties (137 with policies earning premium)
 Soybeans—350 counties (146 with policies earning premium)
 Grain sorghum—125 counties (11 with policies earning premium)
 Cotton—75 counties (16 counties with policies earning premium)
 Peanuts—43 counties, none of which had policies earning premium

Scope of U.S. Insurance Program
From 20 to 18 Insurance Plans Available
Actual Production History [COMBO crops] Livestock Gross Margin
Actual Revenue History
Livestock Risk Protection
Adjusted Gross Revenue
Pecan Revenue
Adjusted Gross Revenue – Lite
Rainfall Index
Aquaculture Dollar
Revenue Assurance
Crop Revenue Coverage
Revenue Protection -NEW
Dollar Amount of Insurance
Fixed Dollar
Revenue Protection With Harvest Price
Exclusion -NEW
Group Risk Plan
Tree Based Dollar Insurance
Group Risk Income Protection
Vegetation Index
Income Protection
Yield Based Dollar Insurance
Indexed Income Protection
Yield Protection -NEW
RP
RPHPE
YP
Multiple Peril Crop Insurance
Crop Insurance Total Policies Sold
2001 - 2010
2011 Policies
Sold To Date
(March 28, 2011)
1,400,000
1,114,192
1,200,000
1,000,000
Total 2011 Revenue
Policies: 1,140,616
800,000
505,961
600,000
400,000
26,424
200,000
0
2001
2002
2003
2004
MPCI
CRC
2005
IP
2006
GRIP
2007
GRP
RA
2008
2009
2010

Revenue Protection
 Insurance coverage that provides protection against production
loss or price decline or increase or a combination of both.

Revenue Protection with Harvest Price Exclusion
 Insurance coverage that excludes the use of the harvest price in
the determination of the revenue protection guarantee.

Yield Protection
 Insurance coverage that only provides protection against a
production loss for crops for which revenue protection is
available but was not elected.
 Revenue Protection Guarantee (per acre)
 For revenue protection only, the production guarantee
(per acre), times the greater of the projected price or the
harvest price.
 If the harvest price exclusion option is elected, the
production guarantee (per acre) is multiplied by the
projected price.
 Yield Protection Guarantee (per acre)
 For a crop that has revenue protection available, the
production guarantee times the projected price.

Commodity Exchange Price Provisions (CEPP)
 A part of the policy that is used for all crops for which revenue
protection is available. This document contains the information
necessary to derive the projected price and the harvest price for the
insured crop, as applicable.

Harvest Price
 A price determined in accordance with the Commodity Exchange Price
Provisions and used to value production to count under revenue
protection.

Projected Price
 A price determined in accordance with the Commodity Exchange Price
Provisions and used for all crops for which revenue protection is
available, regardless of whether the producer elects to obtain revenue
protection or yield protection for such crops.

With the exception of new Basic Provisions other
crops remain largely the same

Other APH based crops will continue to have
established and additional price elections

Note: Crops with Revenue and Yield Protection
(Combo) will NOT have an RMA established price
election
 Commodity Exchange Price Provisions
 Simplifies price discovery
 Standardizes:
 Price discovery periods
 Prices across plans
 Revenue (formally CRC and RA), and Yield
(formally APH) will have same projected price
 One harvest price for Revenue plans

RMA Website: www.rma.usda.gov
 Cost Estimator has replaced the Premium Calculator
 Actuarial Information Browser (AIP)

See a licensed crop insurance agent

Contact a licensed crop insurance agent

Decision tools on AIP Websites



Completed by the insured at agent’s office
Continuous policy unless canceled in writing
Insured elects:
 Which crop(s) to insure
 Must insure all acres of the crop
 By crop/county:
 Plan
 Level
 Price

Completed:
 Annually by producer, with agent
 After crops are planted

Reported information:
 Includes acres, share, and plant date
 Determines coverage and liability



Generated after acreage report is submitted
Details coverage and liability on each unit
Should be reviewed carefully for accuracy


If loss expected, insured must file a notice of loss
Adjuster:





Contacts insured
Visits farm
Determines actual production by using standard Federal procedures
Completes loss paperwork
Loss payment is made, by company

AgriLogic
888-245-6442
 www.agrilogic.com

Agriserve
800-500-2836
 www.asi-agriserve.com

Agro National
712-256-0968
 www.agronational.com

AFBIS
888-483-3914
 www.abisinc.com

ARMtech Insurance
800-335-0120
 www.armt.com

CGB Diversified Services
866-669-3429
 www.diversifiedservices.com

COUNTRY® Mutual Insurance Co.
866-255-7965
 www.countryfinancial.com

Farmers Mutual Hail of Iowa
 www.fmh.com
800-247-5248

Great American Ins. Co.
800-587-1553 ext. 18475
 www.greatamericancrop.com

Heartland Crop Insurance
888-789-5566
 www.heartlandcropinsurance.com

Hudson Crop Insurance
866-450-1445
 www.hudsoninsgroup.com

John Deere Risk Protection
866-404-9057
 www.johndeereriskprotection.com

NAU Country Insurance
888-628-6724
 www.naucountry.com

ProAg Insurance Group
800-776-4045
 www.proag.com

Rain and Hail
800-776-4045
 www.rainhail.com

Rural Community Insurance
 www.rcis.com
800-451-3836