NCC Raises Indemnity Concern

In a letter to Risk Management Agency (RMA) Administrator Brandon Willis regarding historic rains and floods in the Southeast, the NCC specifically noted that many producers who have accepted an appraisal for their loss still have not been able to destroy their crop due to moisture – which is required before receiving an indemnity check.

Published: December 4, 2015
Updated: December 4, 2015

November 30, 2015

Mr. Brandon Willis
Risk Management Agency
USDA/RMA/Stop 0801
Room 6092-South
1400 Independence Ave.
, SW

Washington, DC 20250

Dear Administrator Willis:

On behalf of producers affected by the historic rains and floods in the Southeast, I write to bring attention to two matters that were recently discussed at a meeting of South Carolina producers attended by Associate Administrator Tim Gannon.It is our understanding that the meeting was very productive and we appreciate Mr. Gannon's willingness to meet with the producers. During the meeting, several issues were raised that we believe the Risk Management Agency (RMA) should seriously consider. Timely relief is critically needed by those producers in South Carolina, as well as in other Southeastern states such as North Carolina and Virginia.

Current indemnity procedures require a producer who is accepting an appraisal to destroy the crop prior to receiving their indemnity. We understand the basis for this procedure is to ensure compliance with crop insurance procedures that minimize moral hazard within the program. However, in this special circumstance, many producers will not be able to destroy the crop for many weeks, thus not receiving their indemnity until a much later date. This issue is compounded with the end of the year approaching and many farm and machinery notes coming due. We request that RMA allow a producer facing these circumstances the opportunity to pledge to destroy the crop at the earliest date possible or provide documentation at a later date that the crop was destroyed but allow for indemnity payments to be made prior to crop destruction. These producers faced this disaster at the beginning of harvest and all of the inputs had been put into the crop. The situation they face is dire and the need for timely payment of their indemnity extremely important.

The second issue that surfaced during the meeting was the need for timely reporting of actual yields by the Approved Insurance Providers (AIPs).It is our understanding that companies are required to report yields for policies without a loss to RMA within 45 days of the following Sales Closing Date. This will affect these producers in several ways. The reporting of this data will dictate how quickly Stacked Income Protection Plan (STAX) indemnities can be paid. Many of these producers will be due the maximum indemnity possible for their area but the calculation of the indemnity will be delayed if this information is not reported to RMA in a timely manner. In addition, this information is used to calculate a county's eligibility for the new Yield Exclusion (YE) provision. Unfortunately, under current procedures, 2015 yield information will not be used in the YE provision until 2017.We strongly encourage RMA to review all available avenues for incorporating the 2015 yield data in the YE provision for 2016.We understand all data are not available until after the Sales Closing Date, but we ask RMA to consider providing flexibility in those counties designated as disaster areas.

Another issue that was raised concerned the appraisal methodology used to determine harvestable cotton bolls. Due to the extremely wet conditions, many bolls will not stand up to mechanical harvesting due to brittle or rotted conditions. We intend to discuss this issue with crop insurance companies and their appraisers.

We again thank you for Associate Administrator Gannon's visit to the Southeast and your consideration of our views.


Gary Adams, President and CEO

cc: Tim Gannon
Tim Whitt