.www.InsuranceCommunityUniversity.com
Insight on Crop Insurance Changes
1
The webinar will begin shortly.
There is no audio at this time.
This presentation is being recorded for your viewing pleasure at a future date.
The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.
The PowerPoint presentation is also available under ‘Materials’.
You will receive the course number for your state near the end of class.
Use the ‘chat’ window for questions on the content.
100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.
.www.InsuranceCommunityUniversity.com
Welcome to your Insurance Community University
All of you are currently on mute Un-mute your own system Telephone Option
Select Telephone on your screen Dial in the PIN number so that your number
becomes active Microphone and/or Speaker Option
You can use this option if you have a headset that you use with your computer
Audio
2
.www.InsuranceCommunityUniversity.com
Participation & Chat Window You will receive information from the monitor via
the ‘Chat’ window. Please locate window in the control panel
Q & A is welcomed during the presentation and at the end of the presentation
You will find the question box on your control panel Write your question in that box
and send it to the presenter/organizer
The presenter will take those questions in the order submitted
3
.www.InsuranceCommunityUniversity.com
DOI Requirements When you see a slide with the hand up symbol,
touch the “hand” icon on your control panel Click ONCE only
If you do not raise your hand, the monitor will be in contact with you in the chat box
If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times
4
= Hand is down
.www.InsuranceCommunityUniversity.com
Polling
Throughout the class we will be conducting periodic polls
We need 100% participation on the polls The polls are intended to check
participation but also to create discussion topics throughout the presentation
5
.www.InsuranceCommunityUniversity.com
Forms To Complete for CE
After class ends Return attendance form Proctors – return your form to email
address Email address is in chat window or in
email sent to you today
6
.www.InsuranceCommunityUniversity.com
DOI Requirements
We will file your hours with the DOI after the completion of this webinar and we have received the attendance form.
You have 48 hours to return the form You will be sent a Certificate of
Attendance/Completion by email. Please retain this for your records for five years.
7
.www.InsuranceCommunityUniversity.com
Internet Disruption
If the presenter looses internet connection STAY ON THE LINE
The administrators will communicate with you
.www.InsuranceCommunityUniversity.com
Internet Failure
If the internet fails and all participants are kicked off line by Go To Training or other source then the seminar will be terminated
You will receive instructions by email as to how we will proceed
This is a precautionary notice, only
9
.www.InsuranceCommunityUniversity.com
This class is being recorded
Available in the University This course is approved for CE in CA Only
.www.InsuranceCommunityUniversity.com
DisclaimerInsurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions;
and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by the instructor or the creator(s) of this material do not modify or revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility
to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional
materials provided.
Copyright 2010 – 2013 All Rights Reserved
www.insurancecommunitycenter.com
11
.www.InsuranceCommunityUniversity.com
Your Instructor Today
Rita McMullen AFIS, CPCU, CPIW AAI President, PDM Insurance Agency
12
Sponsored by: www.HartfordLivestock.com
.www.InsuranceCommunityUniversity.com
Topics covered Background on Crop Insurance Examine the traditional production products
vs. newer revenue products to respond to high dollar grain and organic crops.
Overview of Crop Policy Important Dates Types of Crop Insurance products New Products on the Horizon -Subsidies,
What's Next?
13
.www.InsuranceCommunityUniversity.com
Why Crop Insurance
Reduce the unknown FARM STRESSES of Growing Crops
The #1 Cause of Crop Loss across the Country is Weather Related Losses
Insurance Agents cannot control Mother Nature, rather we can emphasize how to minimize the RISK of Growing Crops with the purchase of Crop
16
.www.InsuranceCommunityUniversity.com
Banana Farm in Portland, MA after Sandy destroyed 1500 hectares
17
.www.InsuranceCommunityUniversity.com
Why Crop Insurance
Insurance policies covering farm property have some significant limitations relating to “crops” as “Covered Property” Policies typically exclude “crops” as
covered property Some specialty policies have “limited”
coverage for crops both in the amount of insurance provided and the perils of insurance.
18
.www.InsuranceCommunityUniversity.com
Why Crop Insurance
Some specialty policies will cover only a limited category of crop such as “only table grape crop”.
Policies typically exclude Trees (trellis or vines) Some specialty policies have limited
coverage for such items as trellis or grape vines for limited perils (fire, lightning, vehicle damage, animals other than insects, birds or rodents.
19
.www.InsuranceCommunityUniversity.com
Why Crop Insurance
Property Policies EXCLUDE the Perils that are covered on Crop Policy specifically those relating to weather and disease.
20
.www.InsuranceCommunityUniversity.com
Why Crop Insurance
Protect against production or revenue losses
A financial safety net Collateral for loan
21
.www.InsuranceCommunityUniversity.com
Background on Crop RMA (US Dept. of Agriculture (USDA Organization)
22
.www.InsuranceCommunityUniversity.com
Background on Crop RMA (US Dept. of Agriculture (USDA Organization)
23
.www.InsuranceCommunityUniversity.com
Risk Management Concerns and Education for Crop
Five Major Areas of Risk Marketing Risk Human Resource Risk Financial Risk Legal Risk Production Risk
24
.www.InsuranceCommunityUniversity.com
Traditional Production Products vs. newer revenue products to high dollar grain
and organic crops
25
.www.InsuranceCommunityUniversity.com
Crop Insurance Programs
Purpose Protect against production or revenue
losses A financial safety net Collateral for loan
27
.www.InsuranceCommunityUniversity.com
What is Crop Insurance?
Federally subsidized – a portion of the total premium paid depends on coverage level selected.
Protection for farmer’s crops. We can’t control the weather, but crop
insurance helps farmers to minimize the risk from weather related risks.
28
.www.InsuranceCommunityUniversity.com
Crop Insurance Facts
RMA provides 22 insurance plans on over 350 agricultural commodities in all 50 states and Puerto Rico.
Several Pilot programs for some new crop policies in selected states and counties.
29
.www.InsuranceCommunityUniversity.com
Insurable Crops
Varies by State and County Refer to Actuarial
30
.www.InsuranceCommunityUniversity.com
Producer Obligations In Writing a Crop Policy Report acreage accurately Meet policy deadlines Pay premiums when due, and Report losses immediately Producers will receive
Accurate answers to questions on types of coverage,
Prompt processing of their policy, and Timely payments for covered loss
32
.www.InsuranceCommunityUniversity.com
Parts of the Policy
Common Crop Insurance Policy Basic Provisions 11-BR Specific Crop Provisions Ex. Corn –Coarse Grains –Crop Revenue
Coverage Provisions 11-0041 Policy Endorsements Special Provisions
33
.www.InsuranceCommunityUniversity.com
Parts of the Policy
Actuarial – Issued For Each County & State. Shows Insurable Crops, Sales Closing,
Final Planting Dates, Special Crop Details.
34
.www.InsuranceCommunityUniversity.com
Typical Causes of Loss
Note: Each crop has specific crop provisions Fire Wildlife Earthquake Volcanic Eruption Failure of irrigation water supply due to
an unavoidable Cause of Loss occurring within the insurance period
36
.www.InsuranceCommunityUniversity.com
Special Provisions
Example Soy Bean Cause of Loss Insects: but not damage due to
insufficient or improper application of pest control measures
Plant Disease: but not damage due to insufficient or improper application of disease control measures
Case: soybean rust
37
.www.InsuranceCommunityUniversity.com
Coverage Triggers
Unavoidable: loss directly caused by specific causes of loss
Must be due to a naturally occurring event
38
.www.InsuranceCommunityUniversity.com
Exclusions
Negligence, mismanagement or wrongdoing by you, any member of your family or household, your tenants, or employees;
Failure to follow recognized good farming practices for the insured crop;
39
.www.InsuranceCommunityUniversity.com
Exclusions
Water that is contained by or within structures that are designed to contain a specific amount of water, such as dams, locks or reservoir projects, etc. on any acreage when such water stays within the designed limits
Water that is contained by or within structures that are designed to contain a specific amount of water, such as dams, locks or reservoir projects, etc. on any acreage when such water stays within the designed limits
40
.www.InsuranceCommunityUniversity.com
Claims Procedure
Protect the crop from further damage Give prompt notice of damage to
insurance agent “Within 72 hours of your initial discovery of
damage, but not later than 15 days after the end of the insurance period”
42
.www.InsuranceCommunityUniversity.com
Claims Procedure
If you want to destroy crop, obtain consent from insurance company
If harvested, provide total production Company crop adjuster will determine
whether your yield falls below the yield or dollar guarantee stated in your crop policy.
43
.www.InsuranceCommunityUniversity.com
Insurance Dates: Important Deadlines Sales Closing (SCD)—Last day to apply
for coverage. Final Planting Date (FPD)—Last day to
plant unless insured for late planting. Acreage Reporting Date (ARD)—Last day
to report the acreage planted. If not reported, insurance will not be in effect.
45
.www.InsuranceCommunityUniversity.com
Insurance Dates: Important Deadlines Premium Due Date—Last date to pay the
premium without being charged interest End of Insurance Period—Latest date of
insurance coverage
46
.www.InsuranceCommunityUniversity.com
Replanting Payment
Section 13 of the Basic Crop Provisions Note: May not be included on all Crops
Payment if the crop is damaged by an insurable cause of loss to the extent that the remaining stand will not produce at least 90% of the production guarantee for the acreage and it is practical to replant. Subject to certain stipulations.
47
.www.InsuranceCommunityUniversity.com
Late Planting
Section 16 of the Basic Crop Provisions Insurance will be provided for acreage planted to
the insured crop after the final planting date: Amount of Insurance will be reduced by 1% per
day for each day planted after the final planting date.
Premium amount is same as timely planted acreage.
Subject to certain stipulations.
48
.www.InsuranceCommunityUniversity.com
Prevented Planting
Section 16 of the Basic Crop Provisions Note: Not included on all Crops
Payment if you were prevented from planting the insured crop (failure to plant when other producers in the area were planting will result in the denial of the prevented planting claim) by an insured cause that occurs on or after the Sales Closing Date.
Subject to certain stipulations.
49
.www.InsuranceCommunityUniversity.com
Actual Production History (APH) Insures against yield losses. Coverage based on
insured’s past yield history (up to 10 years Farmer selects amount of average yield to insure,
from 50 to 75% (some areas to 85%). Also selects percent of predicted price between
55 and 100% of established price. If the harvest is less than the yield insured, the farmer is paid an indemnity based on the difference.
51
.www.InsuranceCommunityUniversity.com
Yield Protection (YP)
Insures producers in same manner as APH policies, except a Projected price is used to determine insurance coverage.
Projected price is determined in Accordance with the Commodity Exchange Price Provisions (CEPP) & is based on daily Settlement prices for certain futures contracts.
Producer can select % of price between 55-100%
52
.www.InsuranceCommunityUniversity.com
Actual Revenue History (ARH) Has many parallels to the APH plan,
difference being instead of insuring historical yield, the plan insures historical revenues
Uses unique crop provisions. ARH pilot program protects growers
against losses from low yield, low prices, los quality or any combination of these events.
54
.www.InsuranceCommunityUniversity.com
Revenue Protection (RP)
Provides revenue protection based on price and yield expectations based on the greater of the projected price or the harvest price.
If the harvested plus any appraised production multiplied by harvest price is less than the amount of insurance protection, the producer is paid an indemnity based on the difference.
55
.www.InsuranceCommunityUniversity.com
Revenue Protection (RP)
The producer selects amount of coverage yield from 50-75% (85% in some areas), the projected & harvest price are 100% of the amount determined.
In accordance with the Commodity Exchange Price Provisions (CEPP) based on daily settlement prices for certain futures contracts. settlement
56
.www.InsuranceCommunityUniversity.com
Revenue Protection with Harvest Price Exclusion (RPHPE)
Provides protection in the same manner as RP policies, except the amount of insurance protection is based on the projected price only.
The amount of insurance protection is not increased if the harvest price is greater than the projected price
57
.www.InsuranceCommunityUniversity.com
Revenue Protection with Harvest Price Exclusion (RPHPE)
YP Subsidized Premium Cost per Acre -$22. YP Only Triggers Claim With A Yield Loss,
RP Subsidized Premium Cost per Acre - $34. RP Will Trigger Claim 3 Ways:
By Yield Loss, Price Change, Or A Combination Of Both
58
.www.InsuranceCommunityUniversity.com
Group Risk Plans (GRP
Policy uses a county index as a basis for determining a loss.
When the county yield for the insured crop, as determined by the National Agricultural Statistics Service (NASS), falls below the trigger level chosen by the farmer, an indemnity is paid.
NOT paid based on individual farmer’s loss records.
Yield levels available for up to 90% of the expected county yield.
59
.www.InsuranceCommunityUniversity.com
Group Risk Income Protection (GRIP) Makes indemnity payments only
when the average county revenue falls below the revenue chosen by the farmer.
60
.www.InsuranceCommunityUniversity.com
Dollar Plan
Provides protection against declining value due to damage that causes a yield shortfall.
The amount of the insurance is based on the cost of growing a crop in a specific area.
When the annual crop value is less than the amount of insurance. The maximum dollar amount is stated on the actuarial document.
Producers selects an amount from CAT or additional levels of coverage
61
.www.InsuranceCommunityUniversity.com
Actual Revenue History (ARH) Offer revenue coverage to crops for which
no representative futures market exists. The plan is based on the producer’s own
historical crop revenues and offers protection for price, yield, and quality-based losses.
ARH Guarantees based on the producer’s historical revenue as supported by sales documents.
62
.www.InsuranceCommunityUniversity.com
Actual Revenue History (ARH) ARH values the crop at the point of first
sale Includes picking and hauling Require producers to certify up to ten
years of historical revenue and production.
In the absence of four years, use transitional yields and revenues.
63
.www.InsuranceCommunityUniversity.com
Livestock Risk Protection (LRP) Not traditionally thought of in Crop
Insurance products Newer to the crop insurance arena Designed to insure against declining
market prices of livestock and not any other peril
64
.www.InsuranceCommunityUniversity.com
Livestock Risk Protection (LRP) Coverage determined using futures & options
prices from the Chicago Mercantile Exchange Group (CME).
Ex. Cattle, swine, lamp Producers decide on the number of head to
insured and the length of the coverage period. If the ending price is less than the producer
determined beginning price an indemnity is due.
65
.www.InsuranceCommunityUniversity.com
Livestock and Gross Margin (LGM) Dairy provides coverage for the difference
between the milk price & feeding costs. If the producer determined gross margin is
greater than the actual gross margin an indemnity is paid
Biggest challenge for insurance producers has been the Capacity Limit Cap stated by RMA
66
.www.InsuranceCommunityUniversity.com
Adjusted Gross Revenue (AGR) Insures the revenue of the entire farm
rather than an individual crop by guaranteeing a percentage of average gross farm revenue.
Uses producer’s Schedule F tax return forms and the current year’s expected farm revenue to calculate policy revenue
Has a limitation for livestock income * Not available in all states/counties
68
.www.InsuranceCommunityUniversity.com
AGR Lite
Variation of Adjusted Gross Revenue –no livestock limitation.
Originally created by the PA Department of Agriculture, but has now been expanded to many more states
*not available in all states/counties
69
.www.InsuranceCommunityUniversity.com
Rainfall Index (RI)
Coverage for lack of rainfall only based on weather data collected and maintained by the National Oceanic & Atmospheric Administrations Climate Prediction Center (NOAA).
The index reflects how much precipitation is received relative to long-term average rainfall for a specified areas & timeframe.
Pilots available in select counties EX. Pasture, Rangeland, Hayland (PRF) policies
70
.www.InsuranceCommunityUniversity.com
Vegetation Index (VI)
Observes the long-term changes in the greenness of vegetation of the earth based on the US Geological Survey’s Earth Resources Observation & Science (EROS) normalized difference vegetation index (NDVI) data derived from satellites
Pilots available in select counties
71
.www.InsuranceCommunityUniversity.com
Catastrophic Coverage (CAT) Pays 55% of the price established by RMA on
crop losses in excess of 50% The premium for CAT is FREE to producers as it
is 100% subsidized by the Federal government, however, producers must pay a $300 Administrative fee for each crop insured in each county
CAT coverage is NOT available on all types of policies
NOTE: Limited-resource producers may have this fee waived
72
.www.InsuranceCommunityUniversity.com
Written Agreements
If an established crop policy is not available in a particular state or county, producers can request through their insurance agent for a Written Agreement request to the RMA Regional Office to expand the program to the county.
73
.www.InsuranceCommunityUniversity.com
Written Agreements
Rules & Regulations are available in the Crop Insurance Handbook (CIH) Unit
Each Parcel Of Land That Is Insured Independently Of Other Parcels.
It Is Possible To Have A Loss On One Unit And Receive A Loss Payment While Other Units Have Normal Yields.
74
.www.InsuranceCommunityUniversity.com
Written Agreements
Basic Unit Have different units for different owners of the
land Each crop is kept separate
Optional Units Basic Units May Be Divided In Optional Units Annual Crops – By Section Tree & Vine –By Noncontiguous Need Separate Production Records To
Obtain.
75