RH News | Archive
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April 18, 2005
Mr. Craig Witt, Director
Reinsurance Services Division
Risk Management Agency, USDA
1400 Independence Avenue
Ag Stop 0805
Washington, D.C. 20250
Subject: Comments - Premium Reduction Plan Proposed Rule
Dear Mr. Witt:
On behalf of ACE Property and Casualty Insurance Company, Agri General Insurance Company, and itself, Rain and Hail L.L.C. provides the following comments on the subject proposed rule.
The proposed rule should not be implemented. Premium reduction plans are unnecessary, and implementing the rule will have negative consequences that do long term harm and damage to the program. The following items identify major problems with the premium reduction plan concept. If, despite our recommendation, this proposed rule is to receive further consideration that results in a final rule, the second portion of this document provides specific comments and suggestions.
The Proposed Rule Is Not Timely and Is Unnecessary
The provision in the Federal Crop Insurance Act that allows for premium reduction plans became a part of the law in 1994, eleven years ago. The focus of this legislative addition was to increase participation in the Federal crop insurance program. At that time (for the 1995 reinsurance year), the A&O subsidy was 31% (excluding CAT), compared to an average projected A&O subsidy of 21.6% (excluding CAT) for 2006. Since 1994, program choices and complexity (revenue coverages, increased coverage levels, numerous new crop programs, program expansions) have dramatically increased delivery costs. Moreover, and perhaps most importantly, program participation has increased from approximately 33% of the eligible acres insured in 1994 to nearly 80% in 2004.
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