Below is the AACI PAC Action Alert on the 2011 SRA that discusses the 2^nd draft of the SRA, industry concerns and the recommended actions needed to have your voice heard.  NAU Country Insurance is committed to being your primary source of crop insurance news and information.    

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3/8/10

  Urgent!  Urgent!! Urgent!!! Urgent!!!!Urgent!!!!!

 ACTION MUST BE TAKEN IN THE MONTH OF MARCH

CONTACT MEMBERS OF CONGRESS WITH THESE POINTS

 Talking Points

 Specific points to make to your Members of Congress:

1. The cuts are reckless, excessive and unrealistic.  At $700 million per year, nearly a 25% cut in total payments, company and agent consolidation must occur which will jeopardize rural jobs.  It is ridiculous for USDA to be the cause of such job cuts while the economy is in a recession on the one hand, while on the other the Administration is seeking jobs legislation to stimulate hiring new employees.
2. By proposing a huge cut in the delivery reimbursement, by the Secretary’s statement that "....it is not all that difficult to sell this product.", and by repeated statements by RMA officials that they will take over the delivery of crop insurance if the private sector is not willing to do it for the reimbursement they have offered, the USDA is on a course to have the government take over yet another private industry. 
3. The cuts will force companies to retrench and pull out of less profitable states, throwing farmers' traditional credit arrangements into disarray at a time of tightened credit standards.
4. Farmers will be forced to go back to the old system of seeking a disaster bailout when there is a crop failure, which has never worked well in the past and would be more costly than the crop insurance program.
5. Both the House and Senate rejected as excessive cuts that were smaller in size during the 2008 farm bill (Cooper Amendment in the House and Brown Amendment in the Senate).
6. These cuts would hurt all of Agriculture by reducing the agricultural spending baseline. It will make legislating the 2012 Farm Bill all the more difficult with reduced funding.  Also the changes proposed by the Administration are of such magnitude and so fundamental to the program, their consideration should be reserved to Congress, not administrative action.
7. In the most recent SRA offer, companies would be required to cap agent commissions at an arbitrary percentage of the government reimbursement.  The commission cap is impractical and unenforceable. RMA doesn't have enough staff to monitor the cap. The cap is counter to basic and historical economic principles of how commissions are paid in the insurance industry. The cap arbitrarily sets a maximum value on an agent's business that may or may not reflect the value of that business to the company. Moreover, the cap may lessen incentives for agents to sell certain kinds of policies or crops.  

How To Contact Members of Congress

It is imperative that you call your members of Congress now, while they are still in Washington, before the Easter break.

• Thank your own member of Congress for supporting the crop insurance program.
• Tell your member of Congress the crop insurance delivery system cannot endure cuts of this magnitude without eliminating your job and the delivery of the most important safety net for farmers.
• Tell your member of Congress how many jobs in your agency would be jeopardized and how many farmers you insure who rely on crop insurance for getting credit to plant their crops.
• Tell your member of Congress that jeopardizing the delivery system jeopardizes the program that farmers, lenders and rural communities rely on.
• Ask your own member of Congress to tell USDA and the White House the same thing.

Information to contact your Senators and Representatives can be viewed at:

http://www.contactingthecongress.org/

Additionally, should you desire to contact the White House, that information follows:

White House Phone Numbers

Comments: 202-456-1111

Switchboard: 202-456-1414

Fax: 202-456-2461

If you would like to email the White House, you may fill out a form on their website: http://www.whitehouse.gov/contact

 Background Information

USDA statements show the administration fundamentally does not understand the complexities, challenges and capital requirements in properly and effectively delivering the modern federal crop insurance program to our nation’s farmers.

The USDA Has Indicated a Willingness to Displace Private Sector Delivery of the Program

Perhaps the most disturbing element of the SRA negotiation is the astounding lack of understanding displayed by USDA in justifying huge cuts in the program.  At a recent Senate hearing Secretary Vilsack was apparently sincere when he said that "....it is not all that difficult to sell this product."  That was his explanation for the impact on crop insurance agents of his department's proposal to slash administrative reimbursements.  His statement also appears to reflect a pervasive attitude in the Administration.  In the course of the discussions between industry and USDA about the future of the SRA, RMA officials have repeatedly stated that they are not concerned if there is no agreement with the private sector, because the government can simply take over delivery of crop insurance.  They are, of course, wrong that USDA could deliver today's complex crop insurance program. The last time that the government delivered the program, it was a disaster, because the government could not adjust claims in a timely manner, the level of fraud was high, and the cost of delivery was many times the current cost of delivery per premium dollar. However by RMA’s actions and the Secretary's statements, they are on a course in the SRA negotiation that spells disaster for farmers.

Reckless cuts in Federal Crop Insurance will undermine America’s farm and rural economy, create a farm credit crisis and destroy thousands of rural jobs.

We are now in the midst of the greatest economic crisis since the Great Depression.  Millions of Americans have lost their jobs, the financial stability of the economy remains weakened, even after hundreds of billions of dollars have been spent to bail out major sectors of the economy.  In rural America, farm prices have suffered some decline, but overall the farm economy has remained relatively strong.

This has been due in no small part to the existence of a robust crop insurance program that has provided risk management opportunities for farmers on both weather and price risks, providing the financial underpinning needed to keep credit flowing to farms while many other sectors have seen credit dry up.  Unfortunately, the Administration's latest offer on the Standard Reinsurance Agreement (SRA) would wreck the very institution that has done much to keep farming economically stable through our current turmoil.

The Success of Crop insurance is the Result of 30 years of Bipartisan Cooperation

The success of the crop insurance program is the culmination of 30 years of bipartisan work and investment by both the public and private sectors.  What was once a small regional program to insure a few crops against weather risks has grown into a national insurance system that allows farmers to manage both weather and price risks.  It is the envy of the world, and other nations are attempting to replicate our success.  This expansion has been based on two elements:  significant government investment and a robust private sector delivery and risk-sharing system.  The products offered by crop insurance have proliferated so that companies and agents can tailor coverage to the individual farmer's needs.

Delivery reimbursement as a percent of premium has fallen by nearly 50% over the last 15 years, from 33% to the 17.9% in the last farm bill. Industry has adapted, introducing greater efficiency, relying on greater volumes to amortize costs and ultimately by dipping into profits to keep the system viable. Throughout that period, crop insurance has expanded to new crops and created new products to give farmers flexibility in addressing their risk management needs.  Despite the amazing flexibility of the crop insurance, there are limits to how many financial hits an industry can absorb.

Administration Cuts are contrary to the Law and the Intent of Congress

In the latest SRA offer, the Administration has proposed to cut $6.9 billion over ten years from the funding for crop insurance beyond the $6.4 billion reduced by the 2008 farm bill.  These cuts go so far beyond anything contemplated by Congress that serious questions have been raised about the legality of this proposal (a legal opinion will be provided on request). In addition,both the House and Senate rejected, by large margins, floor amendments to cut more from the crop insurance program. The rejected cuts were $2 billion in the House and $2.3 billion in the Senate—nothing nearly as bad as the $8.4 billion and $6.9 billion being pushed by the Administration

The Impact of these Reckless Cuts

If the Administration has its way and levies a $700 million per year reduction in crop insurance funding, large swathes of rural America will be denied insurance coverage as the companies pull back in the most profitable states and are forced to abandon the rest.  This type of SRA would force crop insurance out of its role as a national risk management tool for all farmers and back to a regional product enjoyed by the fortunate few who live in the most profitable areas, forfeiting 30 years of effort and investment by the public and private sectors.

The impact of such a retrenchment would be devastating for America's farmers.  Over the years risk management insurance has become a key element in keeping credit available for farmers who need ever larger loans to cover rapidly growing input costs.  Without the income security provided by crop insurance, lending institutions have made it clear to their borrowers that credit will not be forthcoming, and that was before banks began to tighten credit availability.  If draconian cuts force companies to withdraw from large geographic regions, tens of thousands of farmers would find themselves cut off from their traditional sources of credit.  At the same time, the more than 18,000 private sector jobs directly related to crop insurance would be threatened.

No Administration Talking Points Can Support Undermining Crop Insurance to Shift a Predetermined Amount of Funds to another Priority

 Since crop insurance is so integral to a successful agricultural sector, why has the Administration embarked on this campaign to destabilize one of the elements critical to farmers?  Is this part of an overall effort to bring down government spending and balance the budget?  Manifestly, it is not.  The projected budget of the Department of Agriculture does not reflect a $6.9 billion decline, nor does the overall federal budget.  Is it a need to transfer money away from farm support to social spending increases in other areas?  Whatever the reason, this is a reckless and foolhardy course they are pursuing.  It throws away three decades of hard bipartisan work building a national institution that has served farmers well.  It would create a credit crisis for one of the few sectors of our economy that is successfully weathering the current financial storm.

Never before has an administration launched such an intensive campaign, complete with talking points, aggressive congressional lobbying, and press releases to discredit the crop insurance program and its delivery system.  However, no amount of talking points and selective use of statistics can justify the destruction of the financial underpinning of American agriculture just to redirect a predetermined amount of funds to another priority.