News Room
Crop Insurers Urge Prompt Action in Naming New RMA Administrator
January 15, 2009
Secretary Designee Tom Vilsack
U.S. Department of Agriculture
Office of the Secretary
1400 Independence Ave., S.W.
Washington, DC 20250
Dear Mr. Secretary Designee,
The USDA's federal crop insurance program, administered by the Risk Management Agency (RMA), provides a public-private partnership that offers risk management tools to farmers and ranchers, many of which can be specifically tailored to farmers' individual needs and wants. Indeed, coverage ranges from 50 percent to 85 percent. Policies can cover multiple perils, named perils, yields, revenue, price and even local area protection. Crop insurance compliments federal farm programs and private risk management options, and in itself offers a key risk management tool for US agriculture and the rural economy.
Moreover, the program is a true partnership in that private insurance companies working with a network of independent agents, sell and service policies. The Federal Crop Insurance Corporation ( FCIC) manages insurance policy terms and conditions, sets rates and reimburses the payment of claims through the RMA.
While the operations and mechanics of the program are complex, the outcome is a robust system that provides needed economic stability to the agricultural sector. It extends beyond indemnification, and even beyond risk management, to helping stabilize agricultural credit benefitting agriculture and rural lenders and local economies. This partnership is built on the relative efficiencies of both the private sector and the federal government. For example, sale and delivery by private companies through a network of private agents allows prompt and competitive service and facilitation of claims. Meanwhile federal cost sharing makes it possible to cover more growers at a lower cost.
Under the crop insurance program, all payments to insurance companies are controlled by the Standard Reinsurance Agreement (SRA), which is written, managed and enforced by USDA. The last SRA was written in 2005. Per the 2008 farm bill, a new SRA can be put into effect by 2011 meaning deliberations would start this year. This will be a major task ahead for a new RMA Administrator and his or her staff. In order to maintain the success of this important federal program - for example, in the 2007 crop year more than 270 million acres were covered by insurance - it will be critically important to appoint an RMA Administrator with knowledge of the program from both the company and producer sides.
The ideal candidate will not only be knowledgeable about crop insurance, but also be an advocate for the program and a leader who can work with Congress as well as a broad array of insurance companies, agents, and farmers and ranchers. Moreover, having such an Administrator in place in a timely manner will be critical. We remember all too well that it was a full 13 months after President Bush's first inaugural before an RMA Administrator was finally named in February of 2002.
Thank you for your consideration of our comments and recommendations.
American Association of Crop Insurers
Crop Insurance Professionals Association
Crop Insurance Resarch Bureau
John Deere Risk Protection
Independent Insurance Agents & Brokers of America
Rural Community Insurance Services
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