WASHINGTON, D.C., July 22, 2010 — The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) testified today before the U.S. House of Representatives Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management in a hearing regarding the current state of the federal crop insurance program.
Recently, the Obama administration released the Risk Management Agency’s (RMA) final version 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.
John F. Dalton, president of Midwest Insurance Associates LLC and the Agri-Land Insurance Agency in Council Bluffs, Iowa and Big “I” Crop Insurance Task Force member, testified on behalf of the Big “I.”
“The Big “I” strongly opposes the new SRA’s commission cap provisions,” said Dalton. “The current SRA represents the first time that RMA, or any federal agency, has attempted to regulate crop insurance commissions rather than allow the marketplace to determine the appropriate commission rate. This also represents the first time that the federal government has intervened in the agent-company relationship. For more than 20 years, insurance agents have worked side by side with crop insurance companies and the federal government to increase the use of crop insurance across America.”
The Big “I” was deeply disappointed with the final version of the SRA where the RMA unfairly restricted agents’ earning ability through arbitrary commission caps in an agreement in which the agents have no voice or ability to represent themselves.
“Crop insurance is a proven risk management tool that protects farmers against unforeseen calamities – and protects the federal government from even more disaster aid than it already hands out,” continued Dalton. “Because of the work of insurance agents, the crop insurance program has grown from relative obscurity to the widely used and successful program we are discussing today.”
The association believes the agent commission cap provision in the SRA is misguided and dangerous to the farm safety net. Additionally, the Big “I” points to research that shows that the average commission rate has declined from 2008 to 2009 proving the fact that allowing the marketplace to determine commission rates works. The agent cap does not impact the crop insurance budget, doesn’t save the federal taxpayer any money, and has no policy merit.
Midwestern states are expected to be hardest hit with the changes in the SRA.
“The A&O subsidy for 2010 in Iowa will be significantly down compared to 2009 because of lower commodity prices and lower commodity volatilities,” said Dalton. “The proposed changes to the delivery cost system concern us because these changes have a disproportionate effect on the Corn Belt states. Our large agriculture economy employs thousands of workers and creates thousands of sustainable jobs. The number of agents and companies writing in the Midwest make this program highly competitive.”
To read the full statement, click HERE.
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.
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