Yesterday, the House Agriculture Subcommittee on General Farm Commodities and Risk Management held a hearing on current issues facing the crop insurance industry, according to the Committee press release.
USDA's Risk Management Agency (RMA) and crop insurance companies recently agreed on a renegotiated Standard Reinsurance Agreement (SRA) "which governs the relationship between the federal government and private companies that deliver crop insurance products to farmers. The SRA outlines risk sharing and reimbursements that the federal government provides to crop insurance companies in order to ensure that farmers and ranchers have access to adequate risk management tools."
The renegotiated SRA involves a 20 percent cut in funding over 10 years and caps administrative costs at $1.3 billion, allowing the cap to rise annually to 1.37 billion in 2015. The reductions were based on a study which found that the crop insurance companies were making excessive profits. To read the US Ag&Food Law and Policy Blog Post on this issue, click here.
Congressman Earl Pomeroy (D-ND) expressed at the hearing that the crop insurance program was the most important risk management tool for producers in North Dakota, according to Insurance News Net. Pomeroy stated, "Looking out at the fiscal challenges we have before us in crafting the 2012 Farm Bill, I feared that without action the crop insurance program would have been in danger of unsustainable cuts." He continued, "The SRA reduces the deficit by $4 billion dollars and improves the regional equity of the program ... This is good for taxpayers and the long term stability of our premier farm safety net." To read the Insurance News Net story, click here.
John F. Dalton, testified on behalf of the Independent Insurance Agents & Brokers of America (IIABA) that it "strongly opposed the new SRA's commission cap provisions" as reported by Insurance News Net. He stated, "The current SRA represents the first time that RMA, or any other federal agency, has attempted to regulate crop insurance commissions rather than allowing the marketplace to determine the appropriate commission rate." The IIABA also believes that the agent commission cap provision in the SRA is "misguided" and "dangerous." To read this Insurance News Net story, click here.
To read the House Agriculture Committee Press Release, click here.
For access to Hearing witness statements and transcripts, click here.
Posted: 7/23/2010
