Frequently Asked Questions
Common Crop Insurance Regulations
Apr 27, 2010
The Common Crop Insurance Policy has been issued. The questions below were from our Federal
Register comment period.
Q: What are the major changes in the revised Common Crop Insurance Regulations and which insurance plans are affected?
A: The major change to the Common Crop Insurance Regulations is that the producer will be able to elect either yield protection or revenue protection for barley, canola, corn, cotton, grain sorghum, rapeseed, rice, soybeans, and wheat. The revised Common Crop Insurance Regulations will replace the Actual Production History (APH), Crop Revenue Coverage (CRC), Revenue Assurance (RA), Income Protection (IP), and Indexed Income Protection (IIP) plans of insurance. The other crops, not listed above and currently insurable under the Common Crop Insurance Policy, will be insurable with the same yield or dollar protection they currently have available.
Q: What is the comment period on the proposed rule?
A: Written comments and opinions on this proposed rule will be accepted until the close of business on September 12, 2006 and will be considered when the rule is to be made final. Comments on the information collection under the Paperwork Reduction Act of 1995 must also be received on or before the close of business
on September 12, 2006.
Q: When will the revised Common Crop Insurance Regulations be effective?
A: The regulations are expected to be effective for 2009 fall crops with a June 30, 2008, contract change date.
Q: Will premium costs change?
A: Premium costs vary from year to year and are based on the producer’s approved yield, insurance prices, and premium rates. The premium rating process for revenue insurance has been modified into one revenue rating methodology (as compared to separate methodologies for RA, CRC, IP, and IIP), so producers may see some premium rate changes, and therefore premium changes, due to the incorporation of all revenue insurance under one methodology. Therefore, there will be only one applicable revenue rate for each policy with the revised program as opposed to the currently separate and different rates for CRC, RA, IP, and IIP.
Q: Why is RMA revising the Common Crop Insurance Regulations to combine these plans of insurance?
A. The regulation was revised to reduce duplication and to simplify revenue and yield protection into: (1) One set of policy materials, Special Provisions, and actuarial documents, (2) One rating and pricing methodology, (3) One premium calculator, and, (4) One database. This combination of APH, CRC, RA, IP, and IIP provides simplification, fewer documents to read and process, and less chance of errors for producers, crop insurance companies, sales agents, and RMA.
Historically, CRC and RA were developed and owned by private entities in accordance with section 508(h) of the Federal Crop Insurance Act while IP and IIP were developed by RMA. These crop insurance plans were unique tests of revenue protection risk management for producers that eventually became very popular. Over time, CRC and RA became more alike as the policies were revised to accommodate producer preferences. This resulted in similar coverage based on slightly different rating and pricing methodologies. The CRC, RA, and APH policies, the actuarial documents, and the Special Provisions also contain a large amount of duplicate information. When CRC and RA reached the last year of maintenance reimbursement (per the Federal Crop Insurance Act), they were turned over to FCIC by their owners.
RMA analyzed the CRC, RA, APH, IP, and IIP plans of insurance and determined that combining them was feasible and would save all participants in the program time and money. Prior to combining the policies, RMA had contracted for a study that analyzed differences between the CRC and RA rating methodologies and determined which elements from the two methodologies were the most appropriate to retain. The FCIC Board had the contracted study reviewed by external experts prior to acceptance. The features that were most often purchased by producers were retained as the primary insurance choices under the new Common Crop Insurance Regulations.
Q: Will there be new procedures?
A: There will be some new procedures based on the new program, but most procedures will remain the same.
Q: Will this change the cost of the crop insurance program?
A: Producers may see some minor changes in premium due to the change in the rating methodology.
Companies will initially incur additional expenses to develop and program computer systems which will be needed to capture information for the revised regulation. Once the revised regulations are in effect and the systems are ready to process the information, running one plan of insurance instead of five will be more cost
effective and will reduce the amount of paperwork and man-hours required to process the policies, train staff, sell policies, and regulate the program.
Q: Will this increase or decrease total program liability?
A: No change in liability is expected.
Q: How does this better serve the producer than what is already in place?
A: The new policy will make risk management decisions simpler for the producer as there will be less duplication of information, less paperwork, less confusion, and fewer materials to be studied.
Q: How will this change affect crop insurance companies and sales agents?
A: Companies will have to make systems changes. Training for agents can be streamlined; there will be less duplication of information, less paperwork, less confusion, and fewer materials to be studied.
Q: Will the loss adjustment process change?
A: No, losses will be adjusted the same way as they have been adjusted in the past.
Q: Will written agreements be affected?
A: There will be one set of rules for written agreements.
Q: Will buy up levels be affected?
A: No, they will remain the same.
Q: Will the T-yield calculations change?
A: T-yield calculations will not be affected by the revised regulations.
Q: Will all current causes of loss (including prevented planting) be covered under the revised regulations?
For more information, contact Chandra Mason.