In section 508(e) of the Federal Crop Insurance Act (Act), Congress envisioned the development of a program whereby insurance providers who could show a specific savings in the delivery of the crop insurance program, without adversely affecting the service to policyholders, could pass that savings to their policyholders in the form of reduced premium.

The Federal Crop Insurance Corporation (FCIC) Board of Directors' review of the Premium Discount Plan (PDP) was rigorous. The FCIC Board of Directors' wanted to ensure that Converium Insurance North America, Inc. (CINA) and its managing general agent, Crop1, had the systemic ability to deliver the program, had the financial capacity to underwrite the policies in the proposed areas, and that program integrity and service to policyholders would not be adversely affected. Five independent reviewers as well as several Board members raised a number of issues that were then satisfied by Crop1 and CINA. The Board also placed a number of restrictions on the program, including limiting the number of states and crops in which the discount could be offered to allow the program to be tested.

Approval of Crop1's proposal does not limit other insurance companies from developing and submitting similar proposals for Board review, as long as the criteria set forth in the Act and established by the Board are met.

Under PDP, Crop1 Insurance is utilizing its Crop Agent Affiliate Network to process applications for the new Crop1 Insurance Premium Discount Program (PDP). The Crop Insurance Affiliate Network includes licensed independent agents appointed by Crop1 Insurance to accept applications, affiliates that are licensed by the applicable state insurance department, and affiliates that work directly with representatives licensed to accept applications. A farmer's application will be submitted to Crop1 Insurance by a licensed representative appointed by Converium Insurance of North America to act as a representative for the company. The required training will be provided by Crop1 Insurance to all representatives in the Crop agent Affiliate Network.

Under PDP, sales and service are primarily conducted online via Crop1's internet site. Crop1 has established a network of affiliates (such as seed dealers, implement dealers, and farm creditors) to assist producers. Crop1 has also established an online chat service where producers can initiate online instant messaging with a licensed agent. Crop1 employs full-service agents to assist producers if an on-farm visit is necessary.

While Crop1's concept of direct sales via the internet is new to crop insurance, other lines of casualty insurance have been direct marketed via the internet for years. The Freedom to E-File Act mandated that RMA and the FCIC through approved insurance providers, enable agricultural producers to access all forms and other program information via the Internet and provide for the electronic filing of all required program paperwork. Crop 1's PDP implementation complies with this requirement.

Related item: Board Memorandum No. 694: Final Resolution (PDF)