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Farmers who limit losses to get insurance refunds

By Staff | Jan 6, 2011

MINNEAPOLIS (AP) – The federal government proposed Thursday to reward farmers who use crop insurance and demonstrate good management practices that limit their losses.

The awards under the Good Performance Refund plan would average about $1,000 per eligible farmer, and payments would go out in the first quarter, in time to help with spring planting, said William Murphy, administrator of the U.S. Department of Agriculture’s Risk Management Agency. More than 67,000 farmers would be eligible, he said.

The plan will cost about $75 million, but the Federal Crop Insurance Corporation said the benefits will outweigh the costs by promoting sound farming practices that reduce losses, discouraging the filing of small claims and encouraging producers to keep using crop insurance. The agency also said the savings may allow for decreases in future premium rates, reducing costs to farmers and taxpayers who subsidize the federal crop insurance program.

“This is an incentive to use the best management practices you can because then you maintain your possible refund into the future,” Murphy said in a phone interview with The Associated Press.

Draft regulations for the program were published in the Federal Register on Thursday. The public comment period ends Jan. 21. Murphy said his agency hopes to issue the final rule in mid-February and send out the checks shortly after that.

To be eligible, farmers already must be in the crop insurance program at the “buy-up” level – a step above the lower cost catastrophic risk protection. To get a payment this year, farmers would need to have been in the program for seven to 10 years from 2000 through 2009 with not more than one year with a reported loss, or have gone four to six years during that period with no reported loss. They must have paid more in premiums than they’ve collected in claims.

Certain new and beginning producers who’ve demonstrated good performance for one to three years during that period also would be eligible.

Since corn and soybeans account for about 60 percent of the crops insured through the federal program, Murphy said, many of the refunds will be concentrated in Iowa, Illinois, southern Minnesota, northwestern Indiana, eastern Nebraska and Kansas. Many growers of specialty crops in parts of California. Florida and the Red River Valley along the North Dakota-Minnesota border will also qualify, he said. About two-thirds of all counties across the country should have at least one eligible producer, he said.

The formula would change from year to year, but refunds cannot exceed 15 percent of premiums paid and will be capped at $25,000 with a minimum refund of $25, under the proposed regulations.

Murphy said the money for the refunds is coming from the $6 billion in savings over the next 10 years achieved when Risk Management Agency renegotiated its standard agreement with crop insurance companies last summer. The agency sought the reductions because it contended the crop insurance companies were making excessive profits.

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