Shutdown's effect on crop insurance limitedFarmers with federal crop insurance who lost crops in the early October blizzard will be compensated.
By: Jonathan Knutson, Agweek
Farmers with federal crop insurance who lost crops in the early October blizzard will be compensated, and concerns about late checks should be alleviated with the reopening of the Risk Management Agency.
Congress voted Oct. 16 to end the government shutdown, reopening RMA offices, as well as other federal agencies, on Oct. 17.
The RMA administers the federal crop insurance program, while private companies sell and service crop insurance policies.
During the shutdown, private crop insurers generally processed claims as usual. But the insurers were unable to verify some information through RMA records, a normal part of the claims process. That led to concern about potential delays in sending out claim checks.
But even during the shutdown, crop insurers nationwide were honoring their contracts and paying claims, says Laurie Langstraat, vice president of public relations for National Crop Insurance Services, an Overland Park, Kan.-based organization that represents private crop insurance companies.
“It’s business as usual,” she says. “If they (policyholders) have an indemnity and their claim is final, their claim will be paid.”
Even with the shutdown, private insurance companies can send out adjusters and conduct appraisals, says Steve Griffin, president of CVision in West Des Moines, Iowa, and a crop insurance consultant.
“They (private insurers) [were] able to do all the field work and assemble all the information except for that last bit of documentation from RMA offices...” he says.
Many, if not most, insurers would be reluctant to issue checks for crop losses until they get that verification, he says.
There likely will be a backlog of paperwork at the reopened RMA offices that should cause only short delays (“days, not weeks or months”) in issuing checks for the finalized claims, Griffin says.
Insurers, for competitive purposes, usually try to pay a finalized claim as soon as possible, he says.
Questions about big claims
There has been speculation nationwide that the shutdown would jeopardize large crop insurance claims.
That apparently reflects an RMA policy that requires insurers to notify the agency of claims in excess of $500,000. Once it receives notification, the RMA has three days to decide whether it will participate in the loss adjustment for the claim, Griffin says.
With RMA offices closed, the agency obviously couldn’t respond within the time limit, Griffin says.
Nonetheless, private insurers’ processing of large claims proceeded as normal, even though furloughed RMA staffers didn’t respond to the notification, he says.
In any case, the RMA seldom involves itself in adjusting large claims, he says.
Insurers able to pay
The RMA shutdown prevented federal reimbursement to private insurers for the money they pay out, Griffin says.
But insurance companies used their own capital to pay claim checks. They have the financial resources to do so because they already collected the premiums for the policies on which they’re paying out now, he says.
That reflects the strength and value of the current system, says Dan Weber, a Casselton, N.D., insurance agent and a national director of the Professional Insurance Agents of North Dakota.
“Thank God we are able to do these claims. Where would these farmers be if everything was truly shut down?” he says.
“We really need to look at the positive of this private/government crop insurance industry. Time and time again, it’s proved it’s working and working extremely well,” he says.