T h e h i s t o r y o f c r o p i n s u r a n c e a n d N a t i o n a l Insuring production agriculture has posed a

challenge throughout our history. One of the

most poignant illustrations of catastophic agri­culture loss in U.S. history was presented to us in John Steinbeck’s great American novel, The

Grapes of Wrath. While the novel chronicles a family’s attempt to escape from extreme

poverty in rural America to a better life, the cat­aclysmic failure of production agriculture was partly created by the lack of a nationwide sup­port system to protect farmers early in the 20th

Century. Unfortunately, agriculture labored

without an equitable risk management system

for most of the 20th Century. Congress passed the Federal Crop Insur­

ance Act in 1938, establishing the first Federal crop insurance program. Program costs were

high and participation by producers was low. Ultimately, the program was not financially

viable or sustainable.

From 1938 to 1980, Congressional at­tempts to assist farmers achieved marginal success. In 1980, new legislation created a public­private partnership between the U.S. government and private insurance companies. This new Federal crop insurance program

sought to bring the efficiencies of the private

sector delivery system together with the regu­latory and financial support of the Federal gov­ernment. The new program increased the type

of commodities insured, however, producer participation was still lower than expected. In 1994, the Federal Crop Insurance

Reform Act dramatically restructured the

program. The Risk Management Agency

(RMA) was created in the U.S. Department of Agriculture in 1996, to administer the Federal crop insurance program.

V i a b l e & S u s t a i n a b l e

C r o p I n s u r a n c e S e r v i c e s By 1998, more than 180 million acres of

farmland were insured under the program. In 2009, over 264 million acres, representing more than 80 percent of farmland in the U.S., were protected through the Federal crop insurance program. National Crop Insurance Services (NCIS) is

an international not­for­profit organization representing the interests of private crop insurance companies. NCIS members are the direct link to production agriculture in America. Since 1915, NCIS has served agriculture

through member companies. It’s role in the in­dustry was enhanced when, in 1989, two organizations, the Crop­Hail Insurance Actuar­ial Association (CHIAA) and the National Crop Insurance Association (NCIA) merged to form the modern­day NCIS structure. Today, 16 private­sector NCIS member

companies, in partnership with the govern­ment, provide a complex risk management safety net to every producer in America choos­ing to participate. More than one million policies were written in 2009. NCIS member companies write Crop­Hail

Insurance; Multiple Peril Crop Insurance (MPCI), the federally subsidized risk manage­ment program; and, privately developed crop insurance programs. Knowing one crop failure or one disaster­

ous year can wipe out multiple years of profit, crop insurance has become an essential busi­ness tool for America’s agricultural producers.

In 2009, over 264 million acres of farmland were protected

through the Federal crop insurance program.

I n f o r m a t i o n M a n a g e m e n t The development of every successful risk

management tool relies on accurate informa­tion. Historical accuracy and volumes of data provide NCIS information management teams necessary input to develop a compendium of products as needs arise.

Lack of historically accurate data, or systems to advance the data, were definite

obstacles to creating a national risk manage­ment system embraced by agriculture. Since the beginning, a primary NCIS focus

has been on the importance of data. That focus has enabled NCIS to provide govern­ment and industry highly technical crop risk information used to develop diverse and

equitable coverage. The information has been

used to: ■ Develop fair underwriting guidelines

■ Develop and test accurate loss adjustment procedures

■ Develop appropriate loss statistics and crop specific policy terms

■ Develop training and educational programs for industry professionals

■ Develop research programs at more than 20 land­grant universities. From labor intensive, manual documenta­

tion processes in the past, to computer sys­tems processing data at warp speed, NCIS’s ability to respond to agricultural risk manage­ment is remarkable. NCIS is often challenged with the task of

analyzing proposed legislative changes to

determine industry effectivness. Developing

actuarial scenarios, testing the data and

reporting the findings to the Federal government assist the decision­making process and prevent unintended risk to production agriculture.

Since the beginning, a primary NCIS focus has been on the importance of data.

S t a t i s t i c a l D a t a & R e p o r t i n g Extensive data collection and information

management is the backbone of NCIS’s ability

to respond to member needs. While MPCI accounts for the majority of

crop insurance protection and data, Crop­Hail insurance has been in existence longer. NCIS assists the crop insurance industry

in meeting the regulatory requirements of the individual states. It develops appropri­ate and adequate loss statistics and insur­ance policy terms and conditions specific to

each crop and location. As a licensed statistical agency, NCIS files

Crop­Hail Final Average Loss Costs (FALCs)

with state insurance departments on behalf of members. NCIS also serves as a liaison with individual state insurance departments through active

participation with the National Association

of Insurance Commissioners (NAIC).

NCIS develops appropriate and adequate loss statistics and insurance policy terms and conditions specific to each crop and location.

A c c o u n t a b i l i t y

The increasingly important role of NCIS is the process of policy review, standardization

and education. For any program to be equitable, the policies

and procedures to accurately determine loss must be the same for every insured producer. Policies and procedures are written by the Risk Management Agency (RMA) and carefully re­viewed by NCIS and its member companies. It is the responsibility of NCIS to analyze

changes and determine if those changes will potentially have a negative impact on produc­tion agriculture.

Be s t P r a c t i c e F a rm i n g

E q u i t a b l e Po l i c i e s

Final changes are published in the Loss Ad­justment Standards Handbooks (LASH) for each crop procedure. There are more than 75 loss adjustment handbooks, most reviewed on an annual basis. Each year, approximately 30 books are revised resulting in the release of new handbooks. Standardization and education are critical to

the continued success of any crop insurance program. NCIS committees provide timely feedback regarding research needs and improvements to crop policies and loss adjustment procedures. This valuable input is accomplished by utilizing the NCIS Regional/State Crop Insurance Committee structure representatives from every NCIS member company. NCIS R/S Committees conduct adjuster

schools throughout the crop year. The schools promote uniformity in the application and un­derstanding of policies and loss procedures. Adjuster schools also address important agro­nomical issues. Adjusters must be able to dif­ferentiate damages from hail, herbicide, stress and other causes of crop damage. Adjuster competency is assured through NCIS’s Crop Adjuster Proficiency Program (CAPP). Communicating “best practice” farming

methods through standardized policies and procedures, accurate and timely data analysis has proven that a private sector­Federal government partnership can work to benefit production agriculture.

For any program to be equitable, the policies and procedures to accurately determine loss must be the same for every insured producer.

Each year, NCIS conducts educational and

professional forums for members. More than

3,500 individuals attend these annual sessions. With over 80 percent of the insurable farm­

land covered by crop insurance, the unique re­lationship between the U.S. government and

the private sector has become the envy of de­veloping nation’s around the globe. The infrastructure of the public­private

partnership continues to be studied by many

developing nations. Government officials, university professors and private insurance

company representatives from countries around the world visit the NCIS corporate

office to learn more about the programs.

rest of the world.

The infrastructure of the public­private partnership continues to be studied by many developing nations.

Every visiting nation understands an equi­table and affordable risk management system available to every producer is one

step toward a vibrant, sustainable system of production agriculture. These representa­tives understand that access to affordable

crop insurance allows American farmers to

provide affordable food for America and the

NC I S Re a c h e s Ou t A t Home & Ab r o a d

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