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The changes that have occurred in the Premium Reduction Plan are
huge. As a result of the 2006 Ag Appropriations Bill, the PRP section
of the Crop Insurance Act will be de-funded for the crop year 2007
and beyond. 2006 will be the last crop year in which the plan is
funded, and this last year includes a complete plan restructure.
The following is a summary of the significant changes for this last
year of PRP.
Any AIP (Approved Insurance Provider)
company who wants to offer the discount plan can no longer offer
a specific discount in advance. The program has been changed to
a company potentially sharing a ’dividend’ back to policy holders
after meeting extensive criteria at the conclusion of the crop insurance
cycle. The 2006 cycle concludes on March 15 of 2007. A company that
chooses to offer a discount and successfully meets all criteria
is limited to their actual demonstrated operational savings with
a maximum discount capped at 4%.
Some of the hurdles for a company paying a 2006 rebate will include
a qualifying procedure that will begin after April of 2007. These
include internal company audits, government audits, and in most
cases independent public accounting audits. These are required to
prove that the company actually operated for the crop year on less
cost that the government underwriting allowances, a new requirement
to providing the PRP discount.
Any possible discounts to be paid could be as late as Spring of
2008. In the event the company does not qualify, they will not be
allowed to pay the discount. Also, the RMA has the option to deny
a company the ability to pay any dividend discount, even if they
do qualify. And finally, if the company succeeds in qualifying for
the rebate, succeeds in getting RMA approval to make the payment,
they still have the option to NOT pay it! We all must keep in mind
that the insuring company will have little or no incentive to pay
such a discount in 2007-2008, with the funding discontinued on any
future PRP plans.
There is NO way to predict if any company will achieve any savings,
if they will be approved by RMA, of if they will then elect to pay
a discount. We are not aware of any company that currently operates
with expenses under their government reimbursement levels.
Goshert Insurance LLC
Strives to provide the very best for our producers. We
have the ability to put your business with AIPs which have chosen
to work toward providing a PRP rebate for the 2006 crop, with AIPs
who have chosen to not provide a possible PRP and are emphasizing
their efforts toward better customer service, and AIPs who are offering
unique products and services that may better serve your specific
needs.
Goshert Insurance can write for Great
American Insurance Company, AgroNational (Stonington Insurance Company),
AgriServe (Agrinational Insurance Company-ADM), and Heartland Crop
Insurance (XL Reinsurance America).
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