With crop insurance destined to be a key component of the next farm bill, what are insurance agents keeping a close eye on as the legislation takes shape?

On May 17, Ruth Gerdes, President of Nebraska-based Auburn Agency Crop Insurance Inc., testified before the House Subcommittee on General Farm Commodities and Risk Management on industry concerns and kudos for the developing farm bill. Shortly after, Gerdes, who also farms, spoke with Farm Press. Among her comments:  

On how her testimony was received

“I think the testimony as well-received. Probably the most interesting part of it – as an agent who’s been in this work for a long time – was the fact that Congress had no idea the (latest) SRA (Standard Reinsurance Agreement) negotiated had such a strong overreach into the agents’ world.”

For more, see here.

“That was pretty shocking to the members. You certainly don’t often see (California Rep. Jim) Costa – who isn’t a member of the subcommittee – come to the hearing to specifically talk about that. Having testified many times over 27 years, I thought that was unusual. You don’t see that happen very often.”

More on the Standard Reinsurance Agreement…

“The SRA is the agreement between the USDA that is negotiated by the Risk Management Agency (RMA) and the AIPs (Approved Insurance Providers).

“It’s a five-year agreement and was last renegotiated in 2010 to begin in 2011. As part of that negotiation they put a cap on agents’ commissions. That devastated, particularly, the specialty crops and was a tremendous overreach.

“I found that the congressmen were most incensed about the fact that they made this rule part of the SRA without any agent participation, any agent input. We don’t have a seat at the table because we don’t sign (the SRA). So, as agents that deliver this product, we had a real whammy handed to us in that SRA.”

Can that be rectified through the next farm bill? Will you have to wait for the next SRA negotiation for that to occur?

“Congress could certainly rectify it. The question is, this far in, how do you rectify something and not create unintended consequences? There is a lot of discussion about that.

“A simple thing to do that would be budget neutral would be for Congress to simply say ‘take the cap off agents and go back to the way it used to be.’ That was where companies and agents would negotiate based on what I perceive as the way insurance should work: the ability of the agent to work hard.

“As it stands now, we’re really quasi-employees of the companies even though we must pay our own health insurance, our own pensions, all our office staffs, all of that. It doesn’t matter whether you do a good job or bad job for your farmers -- you’ll get paid the same.

“That’s why it’s so offensive to agents like me who have worked for 27 years to build a book of business based on service.”

On crop insurance becoming the cornerstone of the next farm bill…

“It doesn’t surprise me. My farmers have been telling me for years that is their preference.

“The 2000 Agriculture Risk Protection Act (ARPA) bill incentivized farmers to do the right thing and purchase up (with crop insurance) and they’ve responded in droves. I believe the participation is something like 83 percent nationwide. That’s phenomenal.”

On the issues involving crop insurance and rice and peanuts…

“I’ve been around the rice issue on the periphery. I don’t sell rice (insurance).

“When you deal with a program as large as crop insurance, there’s a tendency to make a policy for corn, wheat, soybeans and grain sorghum and try to make the same thing work for rice and peanuts.

“The reason I’ve been around the periphery of rice is for four years we’ve been trying to get RMA to (produce) a rice policy. The policy has been held up for four years in their 508(h) process.

“I thought it be approved in April. Last week, I was told it had been sent out for another expert review. After four years I would have thought they could have come up with a policy that meets the needs of rice producers. And I’m very supportive of that – we have to have something actuarially sound that meets (rice producers’) needs.”

What in the Senate farm bill might be a problem from your perspective?

“Certainly what (Illinois Sen. Dick) Durbin and (Oklahoma Sen. Tom) Coburn did to limit the subsidy to $40,000 per producer would decimate the crop insurance industry. The question they asked the GAO (General Accounting Office) was ‘can you save money if you limit the subsidy.’ The obvious answer is ‘yes, you can save money.’ But what harm do you do in the meantime?

“There have been many people who have looked at that on the average. However, they didn’t consider high-dollar value, specialty crops.

“They also didn’t take into account high-risk ground. Where I live (in Nebraska) – and certainly in the South – there is plenty of high-risk ground. If they limit the subsidy to $40,000, then crop insurance will no longer be the cornerstone of farm policy.”