WASHINGTON, D.C., June 15, 2010 — The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) commented on the Risk Management Agency’s (RMA) third and final draft of the Standard Reinsurance Agreement (SRA) which determines the terms and conditions for the Administrative and Operating (A&O) reimbursements and underwriting gains for crop insurance companies.
The language proposes to cut the federal crop insurance program by $6 billion over ten years and puts an 80% cap on agent commissions. The SRA will cap company expenditures on agent commissions at 80% of the A&O subsidy (calculated at the state level), and the SRA will cap total agent compensation, including profit sharing or similar plans, at 100% of the total A&O reimbursement. In an unprecedented move, this represents the very first time that RMA has attempted to directly regulate agent crop insurance commissions rather than allow the marketplace to determine the appropriate commission.
“The $6 billion cut to the crop insurance program coupled with the outrageous command and control commission cap proposal will have a compromising and destabilizing effect on the program and its intended beneficiaries – farmers and ranchers,” says Robert Rusbuldt, Big “I” president & CEO. “In light of the current economic problems, especially in rural America, these proposals will exacerbate an already ravaged farming economy.”
These proposals appear to directly conflict with congressional intent and the program’s goals. From 1938 to 1981, the USDA held sole responsibility for the delivery of the crop insurance program. In 1981, Congress mandated that program delivery be transitioned to the private sector, including insurance agents. At the time, Congress stated that “the sales talents and experience of the private sector commissioned agents . . . are essential to fulfilling the goal of nationwide, generally accepted all-risk insurance protection.” The Big “I” believes that by placing arbitrary restrictions on agent commissions, RMA is contradicting Congressional intent and undermining one of the program’s key goals: professional, efficient delivery of the program to those it is intended to benefit.
“Crop insurance agents are small business owners in towns across rural America that not only employ tens of thousands of hard-working citizens, but are intertwined with the vitality of their communities,” says Charles Symington, Big “I” senior vice president of government affairs. “They support local contractors, corner coffee shops and diners, and other local businesses in their communities. We do not believe that the recent RMA proposal ‘reforms’ the program, but rather needlessly weakens it and cripples an important aspect of the rural economy.”
Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com.