Crop insurance agents already unhappy with terms of their contracts with the U.S. Department of Agriculture are facing a new challenge from a federal employees union that wants to oust them from roles in administering the federal program.
The National Association of FSA County Employees is lobbying federal budget-makers to make the USDA'sFarm Service Agency the sole handler of processing crop insurance claims and collecting acreage reports. It believes having professional insurance agents perform those functions as well is wasteful. "NASCOE believes Congress can find cost-saving measures in program delivery by eliminating duplication of services and by calling on FSA to utilize the County Committee and the County Office employees to deliver these programs," according to a union fact sheet.
NASCOE is seeking to save federal workers from budget cuts at the expense of private agents ahead of negotiations over the 2012 Farm Bill, said Mike Becker, director of federal affairs for the National Association of Professional Insurance Agents. Insurance agents have been a deeply integrated part of the crop insurance program for 25 years, he said. Approximately 18,000 agents work with the crop program, according to PIA. "We don't want to undermine that and roll it back," Becker said. "Doing so would bring it back to when it was under-utilized, costly and very inefficient." The USDA is unprepared to perform needed functions without public/private partnerships with agents, Becker said. "In general, people don't go to a government office for efficiency, much less customer service," he said.
In March testimony before the House Appropriations Subcommittee on Agriculture, Acting Undersecretary for Farm and Foreign Agricultural Services Michael T. Scuse said the USDA has made significant system improvements, in part due to a $117.3 million information technology appropriation. "However, the agency's progress in implementation and delivery of these complex new programs in a timely, secure, and customer-friendly manner has become increasingly difficult to ensure without significant additional progress in modernizing our business processes and IT systems as has been discussed previously with this subcommittee," Scuse said.
Attempts to contact leaders of the National Association of FSA County Employees were unsuccessful.
Agents selling crop insurance are also challenged by changes instituted for Standard Reinsurance Agreements between insurers and the USDA (BestWire, March 7, 2011). The agreements define the terms by which the Federal Crop Insurance Corp., supervised by the Risk Management Agency, provides subsidies and reinsurance on eligible crop insurance contracts. As the means by which the federal program's products are distributed, agents had long held profit-sharing arrangements with the companies, which historically made much of their profits from underwriting gains. The latest terms, adopted amid criticism by the 16 crop insurers, limited companies to paying agent commissions totaling no more than 80% of their reimbursements for administrative and operating expenses. Further, they limit the total cost of commissions and profit-sharing deals with producers to less than 100% of the A&O reimbursement.
The new terms will save the federal government $6 billion over the next 10 years and limit the companies to a projected 14.5% long-term return, RMA Administrator Bill Murphy told Congress (BestWire, July 22, 2010). Negotiations are held every five years. In the previous decade, the number of policies has declined, but from 2006 to 2009, the payments to insurance companies rose from $1.8 billion to an estimated $3.8 billion as commodity prices spiked.
In 2009, the top five writers of multiperil crop insurance in the United States were Ace INA Group, with a 20.2% market share; Wells Fargo Insurance Group, 16.5%; QBE Americas Group, 10.6%; Great American Property & Casualty Insurance Group, 9.2%; and Allianz of America, 8.1%, according to BestLink, which provides online access to A.M. Best's database of insurance information.