Hours before he was scheduled to testify on the subject before the Senate Ag Committee, Ken Ackerman, USDA Risk Management Agency administrator, blasted the USDA's inspector general's report on crop insurance program performance.  The report includes claims, each of which "stigmatizes an entire group and raises public alarm," he says.  Yet, he adds, each point "is based on anecdotal incidents that do not appear to pass any test of statistical significance."

In a lengthy memo to Inspector General Roger C. Viadero, Ackerman refuted many of the points made in the OIG report.  Ackerman and Viadero both are on the witness list for the 8:30 a.m. (EDT) hearing today.  Ackerman's response came yesterday.

The report "misstates the basis for crop insurance premium rates," said Ackerman, "appearing to link company risk-sharing, farmer out-of-pocket costs and program effectiveness for limited-resource farmers."  But crop insurance premiums are based "strictly on risk history and judgments of potential loss," he added.  "Gain-sharing with participating companies is not a factor in this process."

A "central finding" of the report, Ackerman added, is that more federal dollars are going to the reinsured companies "than are helping producers recover from insurance losses."  OIG suggested that RMA revise the standard reinsurance agreement "to increase the amount of risk assigned to the reinsured companies..."

To that, Ackerman replied that in 1997, RMA implemented a recommendation "by conducting a major renegotiation of the SRA.  This renegotiation resulted in a significant increase in the amount of company-borne risk."

The OIG report said a single delivery system for catastrophic policies last year "resulted in significant increases in revenues to the reinsured companies."  Yet the references for supporting information contained "no supporting data for the statement but rather addresses the servicing of limited-resource farmers.  In fact, the text of (the issue) suggests the opposite conclusion," said Ackerman.

Reinsured companies do not have sufficient controls to prevent or detect conflict of interest situations, Ackerman noted, referring to the report.  But the report "does not cite any pervasive pattern of conflict of interest situations," he added.  Out of about 1.2 million policies, "OIG found only isolated instances of possible conflicts of interest."

In his conclusion, Ackerman said, "Your staff has chosen neither to seek input from RMA in preparing this report nor to brief us either prior to or after its release; therefore, we are compelled to respond through this letter to the report."

Since 1994, Ackerman said, RMA "has rectified many of the critical issues that plagued the earlier program. We have consistently met our underwriting targets, substantially increased participation and greatly multiplied the number of tools farmers have available to manage their risks through our vigorous public-private sector partnerships.  Undoubtedly we have made mistakes during this period of rapid growth and expansion.  However, once errors were identified, they were remedied."