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Mike's Blog

Insights from the President of ProAg

What’s Going On?

by Mike Connealy on 02.09.2013

It seems that MC cannot escape the fact that he came of age in the 70’s. Back in 1983 was a movie called “The Big Chill” which had a hit soundtrack that included the classic 1971 Marvin Gaye tune ‘What’s Going On?” At least once a week, I am asked “What’s Going On in crop insurance” ? So, let’s just touch on a couple of current events this time and see if we can generate any interest or questions

On the political front, we continue to see press coverage for and against crop insurance. While the industry has experienced UW loss years in the past such as 2002,
1993 and 1988 the fact is that the market penetration was minimal compared to 2012. Revenue policies are the #1 selection of the farmers and recently added
program features like trend yield and enterprise units further illustrate why this current situation attracts buyers. The informed buyers also are quick to politically
lobby for preserving crop insurance and readily have abandoned direct payments, SURE and ACRE as unnecessary, especially if the current conventional crop
insurance program — delivered by the private sector — is maintained. Do no harm to crop insurance is a great position for all of us to take in the 2013 Farm Bill
discussion. We also need to support premium subsidy at the current levels. Any calls to further cut agents or companies can be answered with the 2012 facts, we all
took a material cut in the 2011 SRA and it may be several years before we recover the losses from 2012 alone. As far as this writer is concerned, let’s keep crop
insurance strong and working well.

On the Risk Management Agency (RMA) Compliance front, we (all AIPs) are dealing with a project that we call “new producer”. The Office of Inspector General (OIG)
of the USDA did a data mining project and compared tax ID numbers for recent crop insurance “new producers” against the FSA data base for tax ID numbers for the last years. Thousands of conflicting records were kicked out for review. By conflicting, we mean that an insured in 2009 or 2010 identified themselves as a “new producer”,
yet records exist in the FSA database that indicate clearly they are not. This impacts the t-yield percentage, amount of insurance, etc. AIPs have been directed by RMA to correct the data,
correct the premium, correct the claim and collect any overpaid indemnities or underpaid premiums. This could also impact 2009 and 2010 agent commission calculations.

ProAg has some 500 files to review for 2009 and 2010. Most of ours are in Texas and other southern states. There is a theory that the 2008 Farm Bill caused the formation of
new entities at FSA to circumvent payment limits, etc. This may have been helpful for FSA programs, but for crop insurance it gives the appearance that a producer was trying
to inflate their guarantee by calling themselves a “new producer”. There will be “due process” for appeals rights and etc. The fact is that the records we have seen, for this project,
clearly indicate that the files we have that were designated by OIG as “invalid” for new producer, are in fact invalid.

Once the industry cleans up these cases for 2009 and 2010, we are expecting to receive 2011 and 2012 data for review. In addition, correcting an APH data base for 2009 will
cause the 2010, 2011 and 2012 policies (and claims, if any) to “error out” at RMA until such time as they are also corrected. This means that a file with one AIP in 2009 will be
corrected and that even if the insured transferred to another AIP in a subsequent year, the history follows through the RMA policyholder tracking system (PHTS).

We have until June to get the first round corrected, so as we close out our 2012 claims we are freeing up people to work on the new producer project. Agents should feel free
to contact their ProAg field rep or RVP and inquire as to whether any of your insureds have been designated for this review. If you represent more than one AIP, you may want to
check with them for information.

So, that is “What’s Going On” right now in crop insurance. If you have any questions or comments on these or any other topics, feel free to write me at mc@proag.com.

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