The Obama Administration’s plan for handling crop insurance commissions marks a sea change that one property-casualty insurance trade group does not like.
Recently, the Obama Administration released the Risk Management Agency’s (RMA) final version of the Standard Reinsurance Agreement (SRA) which determines the terms and conditions for the Administrative and Operating (A&O) reimbursements and underwriting gains for crop insurance companies.
The Independent Insurance Agents & Brokers of America said it was “deeply disappointed’ with the final version of the SRA where the RMA “unfairly restricted agents’ earning ability through arbitrary commission caps in an agreement in which the agents have no voice or ability to represent themselves,” according to a statement.
John F. Dalton, a member of the Big I’s crop insurance task force, said the new plan marks the first time the market has not set rates.
“The Big “I” strongly opposes the new SRA’s commission cap provisions,” said Dalton, president of Midwest Insurance Associates and the Agri-Land Insurance Agency in Council Bluffs, Iowa. “The current SRA represents the first time that RMA, or any federal agency, has attempted to regulate crop insurance commissions rather than allow the marketplace to determine the appropriate commission rate.”
The government plan also changes the agent-carrier relationship, Dalton told the U.S. House of Representatives Committee on Agriculture Subcommittee on General Farm Commoditiees and Risk Management. The hearing explored the current state of the federal crop insurance program.
“This also represents the first time that the federal government has intervened in the agent-company relationship,” Dalton said. “For more than 20 years, insurance agents have worked side by side with crop insurance companies and the federal government to increase the use of crop insurance across America.”
The association said it believes the agent commission cap provision in the SRA is “misguided and dangerous” to the farm safety net, it said. Additionally, the Big I points to research that shows that the average commission rate has declined from 2008 to 2009 proving the fact that allowing the marketplace to determine commission rates works. The agent cap does not impact the crop insurance budget, doesn’t save the federal taxpayer any money, and has no policy merit, the group said.
Midwestern states are expected to be hardest hit with the changes in the SRA.
“Crop insurance is a proven risk management tool that protects farmers against unforeseen calamities – and protects the federal government from even more disaster aid than it already hands out,” said Dalton. “Because of the work of insurance agents, the crop insurance program has grown from relative obscurity to the widely used and successful program we are discussing today.”
Obama federal crop insurance change ‘unfairly restricts agents’ via IFAwebnews .