The Crop Insurance Equity Act of 1999 is based on several principles. First, we do not believe that the crop insurance program should be the next iteration of a farm bill. Therefore, this bill maintains the current policy with regard to federal subsidy for revenue insurance products.
We developed this bill with the intent of addressing the reasons farmers in our states have found crop insurance to be impractical. We believe that farmers from Washington to Florida and Maine to California will find this bill worthy of their support.
Our bill establishes a process under which the current rates and rating methods and procedures will be re-evaluated by USDA to examine factors not currently considered. This may lower crop insurance rates for some commodities. However, because all current rating methodologies are actuarially sound, if the re-evaluation would result in an increased rate, the current method must remain in place.
This bill also establishes a fixed percentage as the federal contribution to a farmer's crop insurance premium. Current law provides higher contributions for lower levels of coverage. This bill would treat all farmers fairly.
We believe that one of the simplest ways to make crop insurance more attractive is to make it operate more like other common forms of insurance, such as homeowners or auto insurance. This bill establishes a process of discounts and a menu of policy options from which farmers can choose. These include discounts for coverage of larger, less risky units of production, employment of technologically advanced agricultural management practices, and the reinstatement of good experience discounts. In addition, farmers will be able to choose whether to purchase specific coverages for prevented planting, quality losses, and cost of production coverage.
Mr. President, this bill raises the basic coverage level for the lowest crop insurance unit--catastrophic coverage--so that all farmers will benefit from this legislation. For the same minimal fee as established in current law, this bill will provide catastrophic coverage for sixty percent of a farmer's historical production at seventy percent of the market price.
Our bill also makes other important changes to the program. It protects new farmers or those who rent new land or produce new crops by ensuring they are assigned a fair yield until they generate adequate actual production data.
The legislation improves the management and oversight of the crop insurance program by establishing the Farm Service Agency as the sole agency for acreage and yield record keeping within USDA. It restructures the board of directors of the Federal Crop Insurance Corporation to include more farmers, and establishes a new office to work with private sector companies who develop new crop insurance products.
One of the major complaints that I have heard about crop insurance is the abuse and fraud that exists in the current program. To address this complaint, our bill also improves the monitoring of agents and adjusters to combat fraud, and strengthens the penalties available to USDA for companies, agents, and producers who engage in fraudulent activities.
I believe that we have developed a sound proposal which Senators will find good reason to support.
Mr. President, I ask unanimous consent that the bill and a summary of the legislation be printed in the Record.
There being no objection, the material was ordered to be printed in the Record, as follows:
S. 1108
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title: This Act may be cited as the `Crop Insurance
Equity Act of 1999'.
(b) Table of Contents: The table of contents of this Act is
as follows:
Sec. 1. Short title; table of contents.
Sec. 102. Alternative rating methodologies.
Sec. 103. Quality adjustment.
Sec. 104. Low-risk producer pilot program.
Sec. 105. Catastrophic risk protection.
Sec. 106. Loss adjustment.
Sec. 107. Cost of production plans of insurance.
Sec. 108. Discounts.
Sec. 109. Adjustments to subsidy levels.
Sec. 110. Sales closing dates.
Sec. 111. Assigned yields.
Sec. 112. Actual production history adjustment for disasters.
Sec. 113. Payment of portion of premium.
Sec. 114. Limitation on premiums included in underwriting gains.
Sec. 202. Office of Risk Management.
Sec. 203. Office of Private Sector Partnership.
Sec. 204. Penalties for false information.
Sec. 205. Regulations.
Sec. 206. Program compliance.
Sec. 207. Payments by cooperative associations.
Sec. 208. Limitation on double insurance.
Sec. 209. Consultation with State committees of Farm Service Agency.
Sec. 210. Records and reporting.
Sec. 211. Fees for plans of insurance.
Sec. 212. Flexible subsidy pilot program.
Sec. 213. Reinsurance agreements.
Sec. 214. Funding.
`(7) Prevented planting:
`(A) In general: The Corporation shall offer coverage for prevented planting of an agricultural commodity only as an endorsement to a policy.
`(B) Equal coverage: For each agricultural commodity for which prevented planting coverage is available, the Corporation shall offer an equal level of prevented planting coverage.
`(C) Planting of substitute agricultural commodities: In the case of prevented planting coverage that is offered under this paragraph, the Corporation shall allow producers that have the coverage, and that are eligible to receive a prevented planting indemnity, to plant an agricultural commodity, other than the commodity covered by the prevented planting coverage, on the acreage that the producer has been prevented from planting to the original agricultural commodity.
`(D) Ineligibility for coverage: A substitute agricultural commodity described in subparagraph (C) shall not be eligible for coverage under a plan of insurance under this title.'.
SEC. 102. ALTERNATIVE RATING METHODOLOGIES.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
(as amended by section 101) is amended by adding at the end the following:
`(8) Alternative rating methodologies:
`(A) In general: Not later than September 30, 2000, the Corporation shall develop and implement alternative methodologies for rating plans of insurance under subsections (b) and (c), and rates for the plans of insurance, that take into account--
`(i) producers that elect not to participate in the Federal crop insurance program established under this title; and
`(ii) producers that elect only to obtain catastrophic risk protection
under subsection (b).
`(B) Review and adjustment: Effective for the 2001 and subsequent crop years, the Corporation shall review and make any necessary adjustments to methodologies and rates established under this paragraph, based on (as determined by the Corporation)--
`(i) expected future losses, with appropriate adjustment of any historical data used in rating to remove--
`(I) the impact of adverse selection; and
`(II) data that no longer reflects the productive capacity of the area;
`(ii) program errors; and
`(iii) any other factor that can cause errors in methodologies and rates.
`(C) Implementation: In developing, implementing, and adjusting rating methodologies and rates under this paragraph, the Corporation shall--
`(i) use methodologies for rating plans of insurance under subsections (b) and (c) that result in the lowest premiums payable by producers of an agricultural commodity in a geographic area, as determined by the Corporation; and
`(ii) update the manner in which rates are applied at the individual producer level, as determined by the Corporation.
`(D) Priority: In developing, implementing, and adjusting alternative methodologies for rating plans of insurance under subsections (b) and (c) for agricultural commodities, the Corporation shall provide the highest priority to agricultural commodities with (as determined by the Corporation)--
`(i) the largest average acreage; and
`(ii) the lowest percentage of producers that purchased coverage under subsection (c).'.
SEC. 103. QUALITY ADJUSTMENT.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
(as amended by section 102) is amended by adding at the end the following:
`(9) Quality adjustment policies: The Corporation shall offer, only as an endorsement to a policy, coverage that permits a reduction in the quantity of production of an agricultural commodity produced during a crop year, or any similar adjustment, that results from the agricultural commodity not meeting the quality standards established in the policy.'.
SEC. 104. LOW-RISK PRODUCER PILOT PROGRAM.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
(as amended by section 103) is amended by adding at the end the following:
`(10) Low-risk producer pilot program:
`(A) In general: For each of the 2000 through 2003 crop years, the Corporation shall carry out a pilot program that is designed to encourage participation in the Federal crop insurance program established under this title by producers who rarely suffer insurable losses.
`(B) Scope: The Corporation shall carry out the pilot program in at least 40 counties that are determined by the Corporation to be adequate to provide a comprehensive evaluation of the feasibility, effectiveness, and demand among producers for a low-risk producer program.
`(C) Premium refund: Notwithstanding section 506(o) and subsection (d)(1), if a producer participating in the pilot program incurs a yield loss in any crop year that is more than 10 percent but not more than 35 percent of the yield determined under subsection (g), the Corporation shall--
`(i) refund all or part, as determined by the Corporation, of the premium that was paid by the producer for a plan of insurance for the crop that incurred the qualifying loss; or
`(ii) apply the amount to be refunded under clause (i) against the premium payable by the producer for equivalent coverage for the subsequent crop year.
`(D) Regulations: The Corporation shall promulgate such regulations as are necessary to carry out the pilot program.'.
SEC. 105. CATASTROPHIC RISK PROTECTION.
Section 508(b)(2)(A) of the Federal Crop Insurance Act (7 U.S.C. 1508(b)(2)(A))
is amended--
(1) in clause (i), by striking `and' at the end;
(2) in clause (ii)--
(A) by striking `each of the 1999 and subsequent crop years' and inserting `the 1999 crop year'; and
(B) by striking the period at the end and inserting `; and'; and
(3) by adding at the end the following:
`(iii) in the case of each of the 2000 and subsequent crop years, catastrophic risk protection shall offer a producer coverage for a 60 percent loss in yield, on an individual yield or area yield basis, indemnified at 70 percent of the expected market price, or a comparable coverage (as determined by the Corporation).'.
SEC. 106. LOSS ADJUSTMENT.
Section 508(b)(11) of the Federal Crop Insurance Act (7 U.S.C. 1508(b)(11))
is amended by striking `11 percent' and all that follows through the end
of the paragraph and inserting `$50 for each claim that is adjusted under
this subsection.'.
SEC. 107. COST OF PRODUCTION PLANS OF INSURANCE.
(a) In General: Section 508(c) of the Federal Crop Insurance
Act (7 U.S.C. 1508(c)) is amended by striking paragraph (5) and inserting
the following:
`(5) Expected market price:
`(A) In general: For the purposes of this title, the Corporation shall establish or approve the price level (referred to in this title as the `expected market price') of each agricultural commodity for which insurance is offered.
`(B) Amount: The expected market price of an agricultural commodity--
`(i) except as otherwise provided in this subparagraph, shall be not less than the projected market price of the agricultural commodity, as determined by the Corporation;
`(ii) may be based on the actual market price of the agricultural commodity at the time of harvest, as determined by the Corporation; or
`(iii) in the case of cost of production or similar plans of insurance,
shall be the projected cost of producing the agricultural commodity, as
determined by the Corporation.'.
(b) Conforming Amendments: Section 508(h) of the Federal Crop
Insurance Act (7 U.S.C. 1508(h)) is amended--
(1) by striking paragraph (9); and
(2) by redesignating paragraph (10) as paragraph (9).
SEC. 108. DISCOUNTS.
Section 508(d) of the Federal Crop Insurance Act (7 U.S.C. 1508(d))
is amended by adding at the end the following:
`(3) Discounts:
`(A) In general: Notwithstanding section 506(o) and paragraph (1), the Corporation shall provide a discount in the premium payable by the producer for a plan of insurance under subsections (b) and (c) for an agricultural commodity in a county if the producer--
`(i) during each of the preceding 5 consecutive crop years--
`(I) has obtained insurance under this title for the agricultural commodity; and
`(II) has not filed any claim under the insurance;
`(ii) if offered by the Corporation, elects to have unit coverage that reduces the risk of loss below the risk of loss that is expected for a unit comprised of all insurable acreage of the agricultural commodity in the county; or
`(iii) implements innovative farming management practices that reduce the risk of insurable loss, as determined by the Corporation.
`(B) Amount:
`(i) In general: Subject to clause (ii), the amount of the discount provided to a producer for a crop year under subparagraph (A) shall be determined by the Corporation.
`(ii) No claim discount: The amount of the discount provided to a producer for a crop year under subparagraph (A)(i) shall increase for each additional consecutive crop year for which the producer is eligible for a discount under subparagraph (A)(i).'.
SEC. 109. ADJUSTMENTS TO SUBSIDY LEVELS.
(a) In General: Section 508(e)(2) of the Federal Crop Insurance
Act (7 U.S.C. 1508(e)(2)) is amended by striking subparagraphs (B) and
(C) and inserting the following:
`(B) In the case of additional coverage below 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount shall be equal to the sum of--
`(i) 50 percent of the amount of the premium established under subsection (d)(2)(B)(i); and
`(ii) the amount of operating and administrative expenses determined
under subsection (d)(2)(B)(ii).
`(C) In the case of additional coverage equal to or greater than 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount shall be equal to the sum of--
`(i) 50 percent of the amount of the premium established under subsection (d)(2)(C)(i); and
`(ii) the amount of operating and administrative expenses determined
under subsection (d)(2)(C)(ii).'.
(b) Application: The amendment made by subsection (a) applies
beginning with the 2000 crop year.
SEC. 110. SALES CLOSING DATES.
Section 508(f)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(f)(2))
is amended by striking the last sentence.
SEC. 111. ASSIGNED YIELDS.
Section 508(g)(2)(B) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2)(B))
is amended--
(1) by striking `assigned a yield' and inserting `assigned--
`(i) a yield';
(2) by striking the period at the end and inserting `; or'; and
(3) by adding at the end the following:
`(ii) a yield determined by the Corporation, in the case of--
`(I) a person that has not been actively engaged in farming for a share of the production of the insured crop for more than 2 crop years, as determined by the Secretary;
`(II) a producer that produces an agricultural commodity on land that has not been farmed by the producer; and
`(III) a producer that rotates a crop produced on a farm to a crop that has not been produced on the farm.'.
SEC. 112. ACTUAL PRODUCTION HISTORY ADJUSTMENT FOR DISASTERS.
Section 508(g)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2))
is amended by adding at the end the following:
`(E) Substitution of transitional yield: Effective beginning with the 2000 crop year, if the producer's yield of an agricultural commodity in any crop year is less than 85 percent of the transitional yield established by the Corporation for the agricultural commodity, the Corporation shall, at the option of the producer, consider the producer's yield for the crop year to be 85 percent of the transitional yield for the purpose of calculating the actual production history for a crop of an agricultural commodity under subparagraph (A).
`(F) Corporation's share of costs: In the case of any yield substitution under subparagraph (E), in addition to any other authority to pay any portion of the premium and indemnity, the Corporation shall pay--
`(i) the portion of the premium or indemnity that represents the increase in premium associated with the substitution of the transitional yield under subparagraph (E);
`(ii) all additional indemnities associated with the substitution; and
`(iii) any amounts that result from the difference in the administrative and operating expenses owed to an approved insurance provider as the result of the substitution.'.
SEC. 113. PAYMENT OF PORTION OF PREMIUM.
Section 508(h)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(2))
is amended in the second sentence by inserting before the period at the
end the following: `, except that the Corporation shall not pay any portion
of the premium for any plan of insurance that offers coverage for losses
associated with a change in price'.
SEC. 114. LIMITATION ON PREMIUMS INCLUDED IN UNDERWRITING GAINS.
Section 508(k) of the Federal Crop Insurance Act (7 U.S.C. 1508(k))
is amended by adding at the end the following:
`(8) Limitation on premiums included in underwriting gains: Notwithstanding any other provision of law, the reinsurance agreements of the Corporation shall require that not more than 50 percent of any premium for catastrophic risk protection under subsection (b) be included in the calculation of gains or losses of an approved insurance provider unless the loss ratio for catastrophic risk protection exceeds 1.0.'.
`(1) In general: The management of the Corporation shall be vested in a Board subject to the general supervision of the Secretary.
`(2) Composition: The Board shall consist of--
`(A) 4 members who are active agricultural producers with or without crop insurance, with 1 member appointed from each of the 4 regions of the United States (as determined by the Secretary);
`(B) 1 member who is active in the crop insurance business;
`(C) 1 member who is active in the reinsurance business;
`(D) the Under Secretary for Farm and Foreign Agricultural Services;
`(E) the Under Secretary for Rural Development; and
`(F) the Chief Economist of the Department of Agriculture.
`(3) Appointment and terms of private sector members: The members of the Board described in subparagraphs (A), (B), and (C) of paragraph (2)--
`(A) shall be appointed by, and hold office at the pleasure of, the Secretary;
`(B) shall not be otherwise employed by the Federal Government;
`(C) shall be appointed to staggered 4-year terms, as determined by the Secretary; and
`(D) shall serve not more than 2 consecutive terms.
`(4) Chairperson: The Board shall select a member of the Board described in subparagraph (A), (B), or (C) of paragraph (2) to serve as Chairperson of the Board.
`(5) Staff: The Board shall employ or contract with 1 or more individuals who are knowledgeable and experienced in quantitative mathematics and actuarial rating to assist the Board in reviewing and approving policies and materials with respect to plans of insurance authorized or submitted under section 508.'.
SEC. 202. OFFICE OF RISK MANAGEMENT.
(a) Establishment: Section 226A(a) of the Department of Agriculture
Reorganization Act of 1994 (7 U.S.C. 6933(a)) is amended by striking `independent
Office of Risk Management' and inserting `Office of Risk Management, which
shall be under the direction of the Board of Directors of the Federal Crop
Insurance Corporation'.
(b) Functions: Section 226A(b) of the Department of Agriculture
Reorganization Act of 1994 (7 U.S.C. 6933(b)) is amended by striking paragraph
(1) and inserting the following:
`(1) Assistance to the Board in developing, reviewing, and recommending plans of insurance under section 508(a)(7) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)(7)) to ensure that each agricultural commodity (including each new or speciality crop) is adequately served by plans of insurance.'.
SEC. 203. OFFICE OF PRIVATE SECTOR PARTNERSHIP.
The Federal Crop Insurance Act is amended by inserting after section
507 (7 U.S.C. 1507) the following:
`SEC. 507A. OFFICE OF PRIVATE SECTOR PARTNERSHIP.
`(a) Establishment: The Secretary shall establish and maintain
in the Department an Office of Private Sector Partnership, which shall
be under the direction of the Board.
`(b) Functions: The Office shall--
`(1) provide at least monthly reports to the Board on crop insurance issues, which shall be based on comments received from producers, approved insurance providers, and other sources that the Office considers appropriate;
`(2)(A) review policies and materials with respect to--
`(i) subsidized plans of insurance authorized under section 508; and
`(ii) unsubsidized plans of insurance submitted to the Board under section 508(h); and
`(B) make recommendations to the Board with respect to approval of the policies and materials;
`(3) administer the reinsurance functions described in section 508(k) on behalf of the Corporation;
`(4) review and make recommendations to the Board with respect to methodologies for rating plans of insurance under this title; and
`(5) perform such other functions as the Board considers appropriate.
`(c) Administrator: The Office shall be headed by an Administrator
who shall be appointed by the Secretary.
`(d) Staff: The Administrator shall appoint such employees pursuant
to title 5, United States Code, as are necessary for the administration
of the Office, including employees who have commercial reinsurance and
actuarial experience.'.
SEC. 204. PENALTIES FOR FALSE INFORMATION.
Section 506(n)(1) of the Federal Crop Insurance Act (7 U.S.C. 1506(n)(1))
is amended--
(1) in subparagraph (A), by inserting `for each claim' after `$10,000'; and
(2) in subparagraph (B), by striking `noninsured assistance' and inserting `any loan, payment, or benefit described in section 1211 of the Food Security Act of 1985 (16 U.S.C. 3811)'.
SEC. 205. REGULATIONS.
Section 506(p) of the Federal Crop Insurance Act (7 U.S.C. 1506(p))
is amended--
(1) by striking `The Secretary' and inserting the following:
`(1) In general: The Secretary'; and
(2) by adding at the end the following:
`(2) Terms of insurance:
`(A) In general: Regulations issued by the Secretary and the Corporation specifying the terms of insurance under section 508 shall be issued without regard to--
`(i) the notice and comment provisions of section 553 of title 5, United States Code;
`(ii) the Statement of Policy of the Secretary of Agriculture effective July 24, 1971 (36 Fed. Reg. 13804), relating to notices of proposed rulemaking and public participation in rulemaking; and
`(iii) chapter 35 of title 44, United States Code (commonly known as the `Paperwork Reduction Act').
`(B) Congressional review of agency rulemaking: In carrying out this paragraph, the Secretary shall use the authority provided under section 808 of title 5, United States Code.'.
SEC. 206. PROGRAM COMPLIANCE.
Section 506(q) of the Federal Crop Insurance Act (7 U.S.C. 1506(q))
is amended--
(1) by redesignating paragraph (2) as paragraph (6); and
(2) by striking paragraph (1) and inserting the following:
`(1) In general: Not later than 180 days after the date of enactment of the Crop Insurance Equity Act of 1999, the Corporation shall establish a program for monitoring compliance with this title by all Federal crop insurance participants, including producers, agents, adjusters, and approved insurance providers.
`(2) Consultation: The Corporation shall consult with approved insurance providers in developing the compliance program.
`(3) Oversight of loss adjustment: As part of the compliance program, the Corporation shall provide for a mechanism to independently review the performance of loss adjusters.
`(4) Program review: Not later than 90 days after the date of enactment of the Crop Insurance Equity Act of 1999, the Corporation shall submit to the Board and the Office of Private Sector Partnership for their review the proposed compliance program under this subsection.
`(5) Annual reports: Beginning with fiscal year 2001, the Corporation shall submit an annual report to the Committee on Agriculture of the House of Representatives, the Committee on Agriculture, Nutrition, and Forestry of the Senate, the Board, and the Office of Private Sector Partnership concerning the compliance program established under this subsection, including any recommendations for legislative or administrative changes that could further improve program compliance.'.
SEC. 207. PAYMENTS BY COOPERATIVE ASSOCIATIONS.
Section 507(e) of the Federal Crop Insurance Act (7 U.S.C. 1507(e))
is amended--
(1) by striking `(e) In' and inserting the following:
`(e) Cooperative Associations:
`(1) In general: In'; and
(2) by adding at the end the following:
`(2) Payments: A cooperative association described in paragraph (1) that is licensed and acts as an agent or approved insurance provider with respect to any plan of insurance offered under this title may provide to the members of the association all or part of any funds received from the Corporation under this title.'.
SEC. 208. LIMITATION ON DOUBLE INSURANCE.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
(as amended by section 104) is amended by adding at the end the following:
`(11) Limitation on double insurance: The Corporation may offer plans of insurance or reinsurance for only 1 agricultural commodity on specific acreage during a crop year, unless--
`(A) there is an established practice of double-cropping in an area, as determined by the Corporation;
`(B) the additional plan of insurance is offered with respect to an agricultural commodity that is customarily double-cropped in the area; and
`(C) the producer has a history of double cropping or the acreage has historically been double-cropped.'.
SEC. 209. CONSULTATION WITH STATE COMMITTEES OF FARM SERVICE AGENCY.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
(as amended by section 208) is amended by adding at the end the following:
`(12) Consultation with state committees of farm service agency: The Corporation shall establish a mechanism under which State committees of the Farm Service Agency are consulted concerning policies of insurance offered in a State under this title.'.
SEC. 210. RECORDS AND REPORTING.
(a) Catastrophic Risk Protection: Section 508(f)(3)(A) of the
Federal Crop Insurance Act (7 U.S.C. 1508(f)(3)(A)) is amended by striking
`provide, to the extent required by the Corporation,' and inserting `to
the extent required by the Corporation, provide to the Secretary, acting
through the Farm Service Agency,'.
(b) Noninsured Crop Disaster Assistance Program: Section 196(b)
of the Agricultural Market Transition Act (7 U.S.C. 7333(b)) is amended--
(1) by striking paragraph (2) and inserting the following:
`(2) Records: To be eligible for assistance under this section, a producer shall provide annually to the Secretary, acting through the Farm Service Agency, records of crop acreage, acreage yields, and production for each eligible crop.'; and
(2) in paragraph (3), by inserting `annual' after `shall provide'.
SEC. 211. FEES FOR PLANS OF INSURANCE.
Section 508(h)(5) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(5)))
is amended--
(1) by striking `Any policy' and inserting the following:
`(A) In general: Any policy'; and
(2) by adding at the end the following:
`(B) Fees for new plans of insurance:
`(i) In general: If an approved insurance provider elects to sell a plan of insurance that was developed by another approved insurance provider after the date of enactment of this subparagraph and the plan of insurance offered coverage that was not available for any crop at the time the plan of insurance was approved by the Board (as determined by the Corporation), the approved insurance provider that developed the plan of insurance shall have the right to receive a fee from the approved insurance provider that elects to sell the plan of insurance.
`(ii) Amount:
`(I) In general: Subject to subclause (II), the amount of the fee that is payable by an approved insurance provider for a plan of insurance under clause (i) shall be an amount that is--
`(aa) determined by the approved insurance provider that developed the plan; and
`(bb) approved by the Board.
`(II) Approval: The Board shall not approve the amount of a fee under clause (i) if the amount of the fee unnecessarily inhibits the use of the plan of insurance, as determined by the Board.
`(C) Payments: The Corporation shall annually--
`(i) collect from an approved insurance provider the amount of any fees that are payable by the approved insurance provider under subparagraph (B); and
`(ii) credit any fees that are payable to an approved insurance provider under subparagraph (B).'.
SEC. 212. FLEXIBLE SUBSIDY PILOT PROGRAM.
Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h))
is amended by adding at the end the following:
`(11) Flexible subsidy pilot program: For each of the 2000 through 2002 crop years, the Corporation shall carry out a pilot program under which flexible subsidies are provided under this title to encourage private sector innovation through exclusive marketing rights and premium rate competition.'.
SEC. 213. REINSURANCE AGREEMENTS.
Section 508(k) of the Federal Crop Insurance Act (7 U.S.C. 1508(k))
is amended by striking paragraph (3) and inserting the following:
`(3) Reinsurance agreements:
`(A) Share of risk: Each reinsurance agreement of the Corporation with a reinsured company shall require the reinsured company to bear a sufficient share of any potential loss under the agreement so as to ensure that the reinsured company will sell and service policies of insurance in a sound and prudent manner, taking into consideration the financial condition of the reinsured company and the availability of private reinsurance.
`(B) Compliance: To promote program compliance and integrity, the Corporation, after notice and an opportunity for a hearing on the record--
`(i)(I) shall assess civil fines in an amount not to exceed $10,000 per violation against agents, loss adjusters, and approved insurance providers that are determined by the Corporation to have recurring compliance problems; and
`(II) may deposit any civil fines collected under subclause (I) in the insurance fund established under section 516(c); and
`(ii) shall disqualify the agents, loss adjusters, and approved insurance providers described in clause (i)(I) from participation in the Federal crop insurance program for a period not to exceed 5 years.
`(C) Review of agreements: As soon as practicable after the date of enactment of this subparagraph and regularly thereafter, in consultation with the Office of Private Sector Partnership, the Corporation shall review the Standard Reinsurance Agreement issued by the Corporation to ensure that the allocation of risk between the Corporation and the reinsured companies is equitable, as determined by the Corporation.'.
SEC. 214. FUNDING.
Section 516 of the Federal Crop Insurance Act (7 U.S.C. 1516) is amended--
(1) in subsection (a)(2)--
(A) in subparagraph (A), by striking `and' at the end;
(B) in subparagraph (B), by striking the period at the end and inserting `; and'; and
(C) by adding at the end the following:
`(C) salaries and expenses of the Office of Private Sector Partnership.';
(2) in subsection (b)(1)--
(A) in subparagraph (B), by striking `; and' and inserting a semicolon;
(B) in subparagraph (C), by striking the period at the end and inserting a semicolon; and
(C) by adding at the end the following:
`(D) salaries and expenses of the Office of Private Sector Partnership, but not to exceed $5,000,000 for each fiscal year;
`(E) administrative expenses of collecting information under section 508(f)(3); and
`(F) payment of fees in accordance with section 508(h)(5)(B).'; and
(3) in subsection (c)(1), by inserting `, fees under section 508(h)(5)(B), civil fines under section 508(k)(3)(B)(i)(II),' after `premium income'.
--
--
Sec. 102--Alternative Rating Methodologies. The preliminary conclusions
from a review of current rating methodologies indicates that many of FCIC's
rates and rating procedures need to be changed. The bill directs FCIC to
develop and implement alternative methodologies for rating insurance plans
by September 30, 2000, that takes into account (1) producers that elect
not to participate in the Federal crop insurance program, and (2) producers
that elect only to obtain catastrophic coverage. FCIC is also directed
to review and make adjustments to methodologies and rates by the 2001 crop
year, based on expected future losses (adjusted to correct for adverse
selection and old data), program errors and other factors that can cause
errors in methodologies and rates. The bill requires FCIC to implement
the rating methodologies in a manner that results in the lowest premium
payable by producers of a commodity in a particular geographic area. Priority
will be given to those commodities with the lowest level of participation
in buy-up coverage plans.
Sec. 103--Quality Adjustment. Ensures that quality adjustment coverage is offered as optional coverage.
Sec. 104--Low-risk producer pilot program. Establishes a pilot program designed to encourage participation in crop insurance by producers who rarely suffer insurable losses. Participating producers would receive a reduction in their payable premium if they incur a yield loss greater than 10%, but not great enough to trigger an indemnity.
Sec. 105--Catastrophic risk protection. Increases the coverage level for catastrophic coverage to 60% of APH at 70% of the price. Other parts of the bill address excessive underwriting gains and unearned loss adjustment expenses being generated as a result of CAT coverages.
Sec. 106--Loss adjustment. Reduces the fees for loss adjustments with respect to catastrophic coverage.
Sec. 107--Cost of production plans of insurance. Provides permanent authority for the Federal Crop Insurance Corporation to provide cost of production and revenue insurance coverage.
Sec. 108--Discounts. The bill requires FCIC to reinstate good experience discounts and to provide discounts for production practices that reduce the risk of loss and for insurance that is issued on larger, more cost-effective insurable units.
Sec. 109--Adjustment to Subsidy Levels. The bill provides for 50% subsidization of all levels of buy-up coverage.
Sec. 110--Sales Closing Dates. The bill restores flexibility to FCIC in determining sales closing dates.
Sec. 111--Assigned Yields. Ensures that beginning farmers or farmers who rent new land or produce new crops will be assigned a fair yield.
Sec. 112--Actual production history adjustment for disasters. Requires FCIC to adjust APH yields for producers who suffer multi-year disasters by directing FCIC to assign a yield equal to 85% of the county transition yield for any year in which a producer's yield falls below that 85% level.
Sec. 113--Payment of Portion of Premium. Prohibits FCIC from subsidizing revenue or price insurance policies.
Sec. 114--Limitation on Underwriting Gains. The bill limits the amount of underwriting gains companies can make on catastrophic policies to 50 percent of the premium.
Sec. 202--Office of Risk Management. Clarifies that the FCIC board of directors shall have direct oversight of RMA.
Sec. 203--Office of Private Sector Partnership. Establishes the Office
of Private Sector Partnership, reporting directly to the
FCIC board. The OPSP will have the authority to review and make recommendations
on both privately and RMA-developed policies. It will also have the authority
to approve reinsurance and review and make recommendations concerning subsidy
for new crop policies and, with board concurrence, approve new rating structures.
Sec. 204--Penalities for false information. Allows anyone convicted of providing false information in connection with any crop insurance claim to be disbarred from all USDA programs.
Sec. 205--Regulations. Allows certain RMA rulemaking activities to be exempted from the Administrative Procedures Act and other federal statutes.
Sec. 206--Program Compliance. The bill enhances the compliance authority of FCIC by 1) requiring FCIC to develop and implement an effective program for monitoring program compliance by all crop insurance participants; and 2) requiring regular oversight of loss adjusters.
Sec. 207--Payment of rebates to cooperative associations. Allows the payment of rebates to cooperatives who engage in the sale of crop insurance.
Sec. 208--Limitation on Double Insurance. Prohibits purchasing insurance
for two crops for the same acreage in a year, except where there is an
established practice of double-cropping.
Sec. 209--Consultation with state committees of farm service agency. Requires FCIC to consult with state FSA committees on the feasibility of polices of insurance being offered in their state.
Sec. 210--Records and reporting. The bill strengthens requirements for accurate recordkeeping and reporting of crop production by participants and non-participants in crop insurance.
Sec. 211--Fees for plans of insurance. Establishes a system of payment for the sale of policies developed by other companies.
Sec. 212--Flexible subsidy pilot program. Allows for the creation of a flexible subsidy pilot program for the 2000-2002 crop years.
Sec. 213--Reinsurance Agreements. Provides tougher sanctions for agents and reinsured companies that have recurring compliance difficulties, and requires a regular review of the Standard Reinsurance Agreement.
Sec. 214--Funding. Makes necessary adjustments in funding provisions to take into account the establishment of the Office of Private Sector Partnership.
Mrs. LINCOLN. Mr. President, I am pleased to be here today with my colleague from Mississippi, Senator Cochran, to introduce the Crop Insurance Equity Act of 1999. We believe this bill makes fundamental changes to the existing Federal Crop Insurance Program that are necessary to make crop insurance more workable and affordable for producers across the country.
As we all know, the government's role in farm programs has changed. The 1996 Farm Bill phased out traditional support for our farmers, and current farm programs require producers to assume more risk than ever before. Due to the Ag economic crisis, there has been much discussion lately on the issue of the `safety net' for our nation's producers. On that point I would like to be perfectly clear. Crop insurance is a risk management tool to help producers guard against yield loss. It was not created and was never intended to be the end all be all solution for the income needs of our nation's producers. As the crop insurance reform debate proceeds, I am hopeful that my colleagues will be cognizant of the various needs in the agriculture community and recognize that while crop insurance is an important part of the `safety net,' it is not and should not be the only income guard for our nation's farmers.
Congress has been attempting to eliminate the ad hoc disaster program for years because it is not the most efficient way of helping our farmers who suffer yield losses. Senator Cochran and I have been working over the last few months with individuals involved in crop insurance delivery, major commodity organizations, and most importantly, farmers, to craft a comprehensive bill that addresses the various reform needs of the crop insurance program. We feel that this legislation takes a significant step toward providing a crop insurance program that is equitable, affordable, and effective.
In response to the outcry we have heard from producers in Arkansas, Mississippi, and across the nation, we have attempted to make the crop insurance program more cost effective for our farmers. In Arkansas, the last estimates I heard indicated that 1% of our cotton producers were participating in the buy-up program this year. Buy-up coverage for all commodities in Akansas historically is around 12%. That tells me that producers at home don't think that crop insurance is currently providing the kind of help they need. Our bill establishes a process for re-evaluating crop insurance rates for all crops and for lowering those rates if warranted. By making the crop insurance program more affordable, additional producers will be encouraged to participate in the program and protect themselves against the unforeseeable factors that will be working against them once they put a crop into the ground.
This legislation directs USDA to establish `good experience' premium
discounts for producers who have not filed claims in the last years. This
simply makes sense. If you have car insurance and you haven't had a wreck
or a ticket over a significant period of time, then your premium is reduced.
Crop insurance should not be any different.
The bill also provides for a more equitable subsidy method by setting the subsidy for crop insurance premiums at a flat rate, regardless of the level of coverage a producer purchases. Current law provides higher levels of federal subsidy to producers who purchase the lowest levels of coverage.
In an attempt to improve the record keeping process within USDA, this legislation establishes the Farm Service Agency (FSA) as the central repository for all acreage and yield record keeping. Current USDA record keeping, split between FSA and RMA, is redundant and insufficient. By including both crop insurance program participants and non-program participants in the process, we hope to enhance the agricultural data held by the agency and make acreage and yield reporting less of a hassle for already overburdened producers.
In addition, this bill establishes a role for consultation with state FSA committees in the introduction of new coverage to a state. The need for this provision was made abundantly clear to Arkansas' rice producers this spring. A private insurance policy was offered to farmers at one rate, only to have the company reduce the rate once the amount of potential exposure was realized. In my discussions with various executives from the company on this issue it became apparent that their knowledge of the rice industry was fairly minimal. Had they consulted with local FSA committees who had a working knowledge of the rice industry before introduction of the policy, the train wreck that occurred might have been stopped in its tracks.
Many of the problems associated with the crop insurance program have been addressed in previous reform measures, however, fraud and abuses are still present to some degree. This bill strengthens the monitoring of agents and adjusters to combat fraud and enhances the penalties available to USDA for companies, agents and producers who engage in fraudulent activities. There is simply no room for bad actors that recklessly cost the taxpayers money.
While this bill was crafted with the input of producers from Arkansas and Mississippi, there is no preferential treatment toward any commodity or geographic region. We have attempted to include provisions that will make the crop insurance program more effective across the nation. We hope that we have achieved this goal and look forward to working with our colleagues to address any measures that will make the crop insurance reform effort more effective.