By KEVIN WALKER
Michigan Correspondent

EAST LANSING, Mich. — Crop insurance agents in Michigan are getting an extra chance this year to tell the federal government about their problems; that’s because the junior senator from Michigan, Democrat Debbie Stabenow, is now chair of the U.S. Senate Agriculture Committee.

“We’ll all be there – Greenstone Farm Credit Services, Spartan Insurance and the others,” said Jessica Godley, crop insurance product manager for Greenstone, of a 2012 farm bill hearing May 31 in East Lansing.

“Every year we go up against this battle,” she said. “Last year we saw a significant reduction in what insurance providers can pay to agents. Insurance agents are doing okay.”

By that, she means independent insurance agents. She said Greenstone pays its agents a straight salary, not a commission. Crop insurance is heavily regulated by the government, and subsidized. It’s managed by a government corporation called the Risk Management Agency (RMA).

Godley said it’s been recognized for some time that insurance agents were overcompensated, and last year the government imposed a cap on agents’ commissions.

“What we’ve seen is it’s weeded out agents that are less productive, agents that weren’t making sure farmers were getting the right kind of insurance,” she said.

Last year the administrator for the RMA, William Murphy, testified before Congress on the crop insurance program and spoke about agents’ commissions. He said one of the goals for the new agreement – known as a Standard Reinsurance Agreement (SRA) – with insurance companies was to align the Administrative and Operating (A&O) subsidy paid to insurers closer to actual delivery costs.

Murphy said insurance companies were “bidding up” agent commissions even though they had taken a budget cut from the government.

“The new (SRA) includes a cap on agent commissions to ensure that companies have sufficient funds to pay the other operating expenses in years in which there may not be an underwriting gain,” Murphy said.

“As the regulator for the federal crop insurance program, RMA saw a clear need to ensure that companies have sufficient funds to pay operating expenses (including agent commissions) without resorting to the reliance on uncertain underwriting gains.”

Jim Byrum, president of the Michigan Agribusiness Assoc., said, “Crop insurance has already taken a $6 billion hit.” He said Stabenow “supports the safety net and she’s said that several times;” however, he wants to make sure others understand the importance of the federal crop insurance program.
Godley said there are other crop insurance matters that need to be known, that could be aired at the hearing. She said cuts to the program have created a kind of competition between private insurers and the USDA Farm Service Agency (FSA), which can handle claims, too. Who is going to be the most efficient at handling paperwork, she asked?

She said there are times when farmers end up having to report to both the FSA and insurance companies over the same matter.

Despite cuts to the program, Godley said last year was one of the best for crop insurance because it was a great planting year and there weren’t very many claims. Yet, farmers buy insurance in good years too, she said. Even part-time farmers buy insurance because “they have to have that crop to pay for all of their other costs.”