Agricultural Risk Protection Act of 2000

NCC Summary of Key Provisions
of Crop Insurance Reform Legislation

Premium Assistance for Innovative Insurance – Producers choosing innovative plans of insurance, such as revenue or cost of production insurance, would receive an equal percentage of premium assistance that producers choosing traditional Multi-Peril Crop Insurance would receive. This will make plans of insurance that protect price risk as well as production risk more affordable to producers. The Risk Management Agency has already implemented this provision for the 2001 crop year.

New Cotton Quality Adjustment Coverage – Producers, at their election, will be eligible to receive subsidized coverage for cotton quality losses that includes bale-by-bale adjustments. This provision will more appropriately compensate cotton farmers for quality losses due to damaging weather.

New Coverage for drought due to water allocation shortages -- Western producers will now be eligible for prevented planting and replant assistance when they are affected by drought due to water allocation shortages or salinity due to similar causes. This provision does not cover droughts or water allocation shortages due to administrative causes – only natural causes.

 New Recordkeeping Provisions and FSA Oversight – The legislation requires all insurance program participants to now submit acreage and yield data to USDA to build a better insurance database and aid in acreage reporting for programs like the Boll Weevil Eradication Program. FSA and RMA will work together to insure information database is done correctly and they are required to reconcile the data to make sure producers and agents are reporting the same information to both agencies.

Catastrophic Risk Protection – The bill continues the standard catastrophic risk protection (CAT) coverage (insuring 50% of yield at 55% of price) at a fee of $100.   However the bill also allows producers to select an alternative CAT coverage based on area yields and losses that provides a higher combination of yield and price protection than the standard CAT coverage. 

 Adjustments to Insurable Yields - Producers are currently penalized with lower insurable yields that do not reflect their productive capability and coverage needs as a result of multiple-year disasters.  The bill ensures that farmers can better insure the yields they have proven they can produce by allowing producers that record a yield of less than 60% of the long-term county average to exclude that low yield and use 60% of that county average yield or "T" yield in the calculation of their Actual Production History (APH). This provision will be implemented in time for the 2001 crop year.

 Premium rate reductions – The bill requires the Federal Crop Insurance Corporation (FCIC) to review the premium rates charged for insurance coverage and lower any premiums that are too high. It also requires the agency to contract out many of its rate setting functions.

 Double Insurance and Prevented Planting – The bill establishes new procedures for insuring multiple crops on the same land, with provisions for traditional double-cropping areas.  Producers also have more flexibility with regard to prevented planting coverage.

Details:

If first crop fails, insured may –

• Collect entire amount for insurable loss and not plant second crop, OR
• Collect entire amount for insurable loss and plant but not insure second crop, OR
• Collect an amount not to exceed 35% of the insurable loss on the first crop and plant and insure a second crop and receive a discount (possibly 65%) on insurance of second crop.

If first crop is prevented from planting, insured may-

• Collect entire amount of prevented planting guarantee for those acres and not plant second crop, OR
• Collect an amount not to exceed 35% of the prevented planting guarantee on the first crop and plant and insure a second crop and receive a discount (possibly 65%) on insurance of second crop
• If producer collects an indemnity on the second crop, producer will receive a zero for APH for that year.
  

 Non-Insured Crop Disaster Assistance Program (NAP) – The bill changes the area loss requirements of the NAP program and replaces it with an individual loss trigger allowing producers of crops for which there is not an insurance policy to have risk protection similar to CAT coverage, with an equal fee.

Improving Program Compliance and Integrity – The bill cracks down on fraud, waste and abuse to build a stronger crop insurance program and lower producer costs.   The conference agreement directs the Secretary to develop and implement a coordinated plan for the FCIC and the Farm Service Agency (FSA) to reconcile producer information annually.  The FSA will also assist the FCIC with investigating claims of waste, fraud or abuse and FSA State committees will review insurance policies for program vulnerabilities to reduce waste and abuse.  The legislation also directs the FCIC to establish methods to identify producers, agents and loss adjusters who may be abusing the program.  It provides for tougher penalties and program disqualification for producers, agents, loss adjusters and others who defraud the crop insurance program. There is also specific language in the legislation that requires that farmers use "good farming practices" in order to be eligible to collect insurance indemnities.

Research and Development – The bill makes a substantial investment in research and development by allowing experts to research and develop new policies, rather than the FCIC.  This provision will increase the quality and quantity of insurance available to producers and make insurance policies available more quickly.  The FCIC would have the authority to enter into contracts for research and development for under-served states and commodities, including specialty crops.

 Pilot Programs for Livestock – The bill provides for expanded pilot authorities, including coverage for livestock.  It also provides for a pilot program on premium rate reduction.

 Education and Risk Management Assistance – The Secretary of Agriculture will establish competitive grants to educate producers in under-served areas about the full range of risk management options.

 Management of Corporation – The legislation would add one additional farmer to the Board of Directors of the Federal Crop Insurance Corporation so that four active farmers would serve on the board.  This provision would also require that at least one member of the board be a specialty crop producer.

 Electronic Availability of Crop Insurance Information – The FCIC will make crop insurance information available electronically and will develop methods to allow producers and insurance providers to submit information electronically.