Agents Oppose Crop Insurance Premium Reduction Plan

June 29, 2005

The Independent Insurance Agents & Brokers of America testified Tuesday before a Senate committee on the ongoing question of the Premium Reduction Plan (PRP), which potentially opens the door for unqualified and poorly-trained individuals to sell crop insurance.

Norman Nielsen, president of Preston, Iowa-based Associated Insurance Counselors Inc., testified on behalf of the Big “I” before the Senate Committee on Agriculture, Nutrition and Forestry on the overall issue of the Federal Crop Insurance Program (FCIP) and the effect PRPs will have on it. Previously, Nielsen testified for the Big “I” on May 4 before the House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management.

Nielsen noted the association’s staunch opposition to the PRP and also questioned why the federal Risk Management Agency (RMA) is allowing one company to continue offering a PRP after the Federal Crop Insurance Corporation (FCIC) board suspended PRPs until completion of the rule-making process.

“If this is RMA’s idea of promoting competition in the industry, then the future looks very bleak for anyone involved in the delivery of this important risk management program, and I shudder to think of the impact it will have on America’s agriculture producers,” Nielsen said.

The Big “I” opposes PRPs because they potentially promote a reduction of the role of agents in the delivery of crop insurance, despite the years of training and expertise agents have with this line of coverage. There are concerns that PRP salespeople will not be qualified or able to offer the same quality of service, as well as the likelihood that companies offering PRPs will “cherry-pick” larger, more profitable farms. If PRPs proliferate, the likelihood of consolidation in the industry becomes greater, which means smaller farms and farmers could be out in the cold for crop coverage.

“This is definitely a matter of crucial importance to independent agents who sell crop insurance, as well as to farmers, but its ramifications go well beyond agents and farmers,” said Patrick O’Brien, Big “I” director of federal government affairs. “The bigger question here is of interest to all consumers and independent agents and brokers, which is: whether individuals without the expertise and the statutory qualifications required of insurance agents will be allowed to sell insurance plans. This is potentially a very slippery slope, and it is crucial that Congress not allow it.”

The House of Representatives recently adopted a provision that withholds funding for PRPs as part of its FY 2006 agriculture spending bill. “We are hopeful that the Senate will recognize the merit in this provision and include it in the overall spending package that reaches the President’s desk,” O’Brien said.

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