V i a b l e & S u s t a i n a b l e

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2 T h e h i s t o r y o f c r o p i n s u r a n c e a n d N a t i o n a l Insuring production agriculture has posed a challenge throughout our history. One of the most poignant illustrations of catastophic agriculture loss in U.S. history was presented to us in John Steinbeck s great American novel, The Grapes of Wrath. While the novel chronicles a family s attempt to escape from extreme poverty in rural America to a better life, the cataclysmic failure of production agriculture was partly created by the lack of a nationwide support system to protect farmers early in the 20th Century. Unfortunately, agriculture labored without an equitable risk management system for most of the 20th Century. Congress passed the Federal Crop Insurance Act in 1938, establishing the first Federal crop insurance program. Program costs were high and participation by producers was low. Ultimately, the program was not financially viable or sustainable. From 1938 to 1980, Congressional attempts to assist farmers achieved marginal success. In 1980, new legislation created a public private partnership between the U.S. government and private insurance companies. This new Federal crop insurance program sought to bring the efficiencies of the private sector delivery system together with the regulatory and financial support of the Federal government. The new program increased the type of commodities insured, however, producer participation was still lower than expected. In 1994, the Federal Crop Insurance Reform Act dramatically restructured the program. The Risk Management Agency (RMA) was created in the U.S. Department of Agriculture in 1996, to administer the Federal crop insurance program. V i a b l e & S u s t a i n a b l e

3 C r o p I n s u r a n c e S e r v i c e s By 1998, more than 180 million acres of farmland were insured under the program. In 2009, over 264 million acres, representing more than 80 percent of farmland in the U.S., were protected through the Federal crop insurance program. National Crop Insurance Services (NCIS) is an international not for profit organization representing the interests of private crop insurance companies. NCIS members are the direct link to production agriculture in America. Since 1915, NCIS has served agriculture through member companies. It s role in the industry was enhanced when, in 1989, two organizations, the Crop Hail Insurance Actuarial Association (CHIAA) and the National Crop Insurance Association (NCIA) merged to form the modern day NCIS structure. Today, 16 private sector NCIS member companies, in partnership with the government, provide a complex risk management safety net to every producer in America choosing to participate. More than one million policies were written in NCIS member companies write Crop Hail Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk management program; and, privately developed crop insurance programs. Knowing one crop failure or one disasterous year can wipe out multiple years of profit, crop insurance has become an essential business tool for America s agricultural producers. In 2009, over 264 million acres of farmland were protected through the Federal crop insurance program.

4 I n f o r m a t i o n M a n a g e m e n t The development of every successful risk management tool relies on accurate information. Historical accuracy and volumes of data provide NCIS information management teams necessary input to develop a compendium of products as needs arise. Lack of historically accurate data, or systems to advance the data, were definite obstacles to creating a national risk management system embraced by agriculture. Since the beginning, a primary NCIS focus has been on the importance of data. That focus has enabled NCIS to provide government and industry highly technical crop risk information used to develop diverse and equitable coverage. The information has been used to: Develop fair underwriting guidelines Develop and test accurate loss adjustment procedures Develop appropriate loss statistics and crop specific policy terms Develop training and educational programs for industry professionals Develop research programs at more than 20 land grant universities. From labor intensive, manual documentation processes in the past, to computer systems processing data at warp speed, NCIS s ability to respond to agricultural risk management is remarkable. NCIS is often challenged with the task of analyzing proposed legislative changes to determine industry effectivness. Developing actuarial scenarios, testing the data and reporting the findings to the Federal government assist the decision making process and prevent unintended risk to production agriculture. Since the beginning, a primary NCIS focus has been on the importance of data.

5 S t a t i s t i c a l D a t a & R e p o r t i n g Extensive data collection and information management is the backbone of NCIS s ability to respond to member needs. While MPCI accounts for the majority of crop insurance protection and data, Crop Hail insurance has been in existence longer. NCIS assists the crop insurance industry in meeting the regulatory requirements of the individual states. It develops appropriate and adequate loss statistics and insurance policy terms and conditions specific to each crop and location. As a licensed statistical agency, NCIS files Crop Hail Final Average Loss Costs (FALCs) A c c o u n t a b i l i t y with state insurance departments on behalf of members. NCIS also serves as a liaison with individual state insurance departments through active participation with the National Association of Insurance Commissioners (NAIC). NCIS develops appropriate and adequate loss statistics and insurance policy terms and conditions specific to each crop and location.

6 B e s t P r a c t i c e F a r m i n g The increasingly important role of NCIS is the process of policy review, standardization and education. For any program to be equitable, the policies and procedures to accurately determine loss must be the same for every insured producer. Policies and procedures are written by the Risk Management Agency (RMA) and carefully reviewed by NCIS and its member companies. It is the responsibility of NCIS to analyze changes and determine if those changes will potentially have a negative impact on production agriculture. E q u i t a b l e Po l i c i e s Final changes are published in the Loss Adjustment Standards Handbooks (LASH) for each crop procedure. There are more than 75 loss adjustment handbooks, most reviewed on an annual basis. Each year, approximately 30 books are revised resulting in the release of new handbooks. Standardization and education are critical to the continued success of any crop insurance program. NCIS committees provide timely feedback regarding research needs and improvements to crop policies and loss adjustment procedures. This valuable input is accomplished by utilizing the NCIS Regional/State Crop Insurance Committee structure representatives from every NCIS member company. NCIS R/S Committees conduct adjuster schools throughout the crop year. The schools promote uniformity in the application and understanding of policies and loss procedures. Adjuster schools also address important agronomical issues. Adjusters must be able to differentiate damages from hail, herbicide, stress and other causes of crop damage. Adjuster competency is assured through NCIS s Crop Adjuster Proficiency Program (CAPP). Communicating best practice farming methods through standardized policies and procedures, accurate and timely data analysis has proven that a private sector Federal government partnership can work to benefit production agriculture. For any program to be equitable, the policies and procedures to accurately determine loss must be the same for every insured producer.

7 N C I S R e a c h e s O u t A t H o m e & A b r o a d Each year, NCIS conducts educational and professional forums for members. More than 3,500 individuals attend these annual sessions. With over 80 percent of the insurable farmland covered by crop insurance, the unique relationship between the U.S. government and the private sector has become the envy of developing nation s around the globe. The infrastructure of the public private partnership continues to be studied by many developing nations. Government officials, university professors and private insurance company representatives from countries around the world visit the NCIS corporate office to learn more about the programs. Every visiting nation understands an equitable and affordable risk management system available to every producer is one step toward a vibrant, sustainable system of production agriculture. These representatives understand that access to affordable crop insurance allows American farmers to provide affordable food for America and the rest of the world. The infrastructure of the public private partnership continues to be studied by many developing nations.

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