AGENTS MAKE A DIFFERENCE
Producer acceptance of the AGR pilot is varied. We suspected that where it was working we'd find an exceptional agent. We were right.
Sep 10, 2001 - Jack Chapman of the Chapman Lampson, Inc., insurance agency in Prosser, Washington, believes that whether viewed as umbrella or safety net, the Adjusted Gross Revenue (AGR) plan of insurance may be the best insurance coverage for producers with multiple crops, and certainly for producers who grow crops not insurable under other policies.
Chapman has always worked in the insurance business, selling a full line of insurance for 25 years, adding crop insurance through the Fireman's Fund in 1985. "Our local major crops include apples, grapes, wheat, corn, potatoes, cherries, and pears, all of which are insurable. But we haven't had coverage for specialty crops like hops, asparagus, apricots, peaches, nectarines, or for livestock," said Chapman.
Crop insurance is a very critical tool in the risk management arsenal for producers in south central Washington, a region that receives 6-7 inches of rainfall a year and depends heavily on the now drought-stricken Columbia River basin for its irrigation water. Before the AGR pilot was extended to 11 key counties in Washington, the local specialty crop grower did not have crop insurance options if a commodity wasn't covered by a Multiple Peril Crop Insurance policy.
When asked whether he had found the AGR plan difficult to understand, Chapman said, "We have found that the general concept of AGR is more readily grasped than the complexities of individual crop policies." The seven agents who sell crop insurance for Chapman Lampson sold 70 policies last year, and Chapman expects to double that figure this year. "We didn't have much time to get the word out after the AGR pilot program was extended to Washington, but I would guess that 50 percent of the people we talked with about the program ended up buying a policy."
To promote a strong awareness of the AGR pilot, the Risk Management Agency's (RMA) Spokane Regional Office partnered with many agricultural professionals to reach thousands of producers in the Northwest. One of the most successful training events was a satellite conference with insurance company and Cooperative Extension representatives manning 11 sites where 370 producers participated in a 2-hour telecast.
When Chapman realized the value of this whole farm revenue product and what it could mean for producers of uninsurable crops, staff in the Chapman Lampson crop insurance department began their own educational blitz about AGR for local growers. "If we talk at length about other crop insurance programs to producers, we begin to see their eyes glaze over, but they remain enthusiastic about the new AGR program," added Chapman. "Doubtless, like other new insurance ideas, the AGR program will have a few glitches to be worked out. But I think a whole farm revenue policy is the crop insurance product of the future."
Compliance Weighs In
Like other crop insurance agents across the United States, Chapman has been audience to the increased emphasis on compliance issues legislated by the Agricultural Risk Protection Act. When asked his view about the new partnership between the RMA and the Farm Service Agency, Chapman said, "I know there are abuse situations across the country, and the two agencies working together would certainly deter abuse of the program," but he added, "Since I have been selling crop insurance, I've only seen two suspect cases. Most farmers are honest and want adequate coverage. They don't want to endanger their access to the protection that government programs provide."
The talk about compliance led Chapman to point out some unique built-in compliance features of the AGR program. "I haven't seen any loopholes in the AGR policy that could open the door to abuse. There's no advantage to inflating projected income or production because AGR guarantees whichever is less--projected income and production for the upcoming year, or the average income and production figures shown on the individual producer's last 5 years of the Schedule F tax form."
Comparing a producer's average historic revenue data to expected revenue for the insurance year provides the level of guaranteed revenue for the insurance period. When estimating revenue to be covered, the producer must work with the lower figures on these averages, essentially limiting income projections based on increased yields. The AGR plan also protects against abuse by reducing the adjusted gross revenue coverage downward if allowable expenses fall below 70 percent of approved expenses.
Outlook for AGR
Dave Paul, director of RMA's Spokane office said, "I want to commend company agents like Chapman who were among the many professionals from grower associations, lenders, Cooperative Extension, Washington State University, and other groups who worked together to bring the whole farm insurance pilot into the Northwest."
Over the next year, RMA will evaluate the effects of recent changes to the AGR program. As with any pilot, the determination for expanding further will hinge on whether the newly revised policy meets the risk management needs of farmers while meeting underwriting requirements. Given the positive results in Washington state and low participation elsewhere, agent involvement is proving to be a vital component of the program's success.
AGR Provides Whole Farm Protection
Approved as a pilot program by the Federal Crop Insurance Corporation in 17 states and 214 counties, the whole farm Adjusted Gross Revenue plan of crop insurance protects a producer's income from agricultural commodities from certain natural disasters and market fluctuations. The plan complements traditional forms of crop insurance, where they are available, by coordinating policy premiums, protection, and benefits with the other plans. The AGR concept:
- Uses a producer's historical IRS Schedule F tax form information and annual farm report as a base to provide a level of guaranteed revenue for the insurance period.
- Provides insurance coverage for multiple agricultural commodities in one insurance product.
- Establishes revenue as a common denominator for the production of all agricultural commodities.
- Reinforces program credibility by using IRS fax forms and regulations to alleviate compliance concerns.