The 2014 Farm Bill creates a new environment for American agriculture far more friendly to producers who are experienced and comfortable using USDA’s Federal crop insurance program under the Federal Crop Insurance Corporation (FCIC). Not only did Congress repeal many of the older crop programs administered by USDA’s Farm Service Agency, including Direct Payments, Countercyclical Payments, and the Average Crop Revenue Election (ACRE) program. But it replaced them with new ones, such as Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC), built with a clear insurance slant, including insurance-style guarantees, coverages, and requirements.
At the same time, the Farm Bill expands and strengthens the FCIC program with new products (shallow loss, margin, so on), new authorities, and stronger financial support.
For farmers not used to relying on FCIC insurance, the change can seem daunting – and farmers face major decisions later in 2014 regarding which direction to take. FCIC crop insurance places key responsibilities on farmers. Not only must growers pay premiums, but FCIC insurance strongly favors good managers, good record keepers, and good self starters.
FCIC rules can be strict, but they also give farmers rights, clarity, and choices. FCIC and its partner insurance companies sold over 1.2 million policies in crop year 2013 covering almost 300 million acres of American farmland, with guarantees topping $123 billion dollars in crop value – a dramatic increase from a decade ago. These benefits are a key reason so many farmers have made FCIC insurance their principal form of risk protection, and that Congress felt the confidence to make it the pre-eminent feature of the new Farm Bill.
So if you haven’t learned the FCIC program yet, now is the time. Here are a few basic rules to get started:
- Go to school early: To work best, FCIC crop insurance requires growers to make lots of choices: what policy to buy, what coverage level, whether to use optional units, whether to buy revenue, whole farm, or other features, whether to integrate FCIC coverage into a larger fiscal or marketing plan, and more. What you choose affects how much you’ll pay in premiums as well as what you’ll receive in indemnities for a loss.
Making good choices demands knowledge. Don’t assume you can simply read a brochure or glance at a web site to understand your policy. If you are new to crop insurance, take time to do homework. Invite an agent to your house, give them coffee, and don’t let them leave until they answer all your questions. (The agents want your business; make them earn it.) Many local colleges, farm groups, and businesses sponsor classes on crop insurance. Take one. The more you know, the better you’ll do.
And remember: FCIC insurance has strict sales closing dates – usually several weeks before planting. If you miss the deadline, you’re out for the season. Check these, and don’t leave your preparation to the last minute.
- Make sure you have an FCIC program that works for you and your crop. FCIC insurance today covers more than 100 different crops, including most specialty and regional crops plus pasture, rangeland, livestock in various forms, and others. Still, gaps remain, and the program is a work in progress. Coverage for organic crops is often based on conventional prices, coverage for some niche specialty crops is spotty or missing, and some coverages are unattractive, price prohibitive, or poorly fitted to local risks.
RMA is constantly working to fill these gaps, responding to Congress and grower groups. The FCIC Board of Directors has a program called “508(h)” specially designed for grower groups to take the lead in bringing new coverage ideas to the table. RMA also has authority to contract with expert policy developers to write new policies.
If you fall into an “underserved” category, take the initiative. Contact your local grower group quickly. Developing and winning approval for new coverage plans takes time, and the sooner you start, the better.
- Know your duties as an insured. FCIC rules are far more rigid than FSA’s, primarily because crop insurance is built on contracts involving not just the farmer and USDA but also private insurance companies. For instance, FSA rules allow “good faith” exemptions to program requirements or “equitable relief” for farmers who inadvertently cross lines. These concepts simply do not exist in crop insurance. Missing deadlines such as sales closing dates, payment due dates, or final harvest dates can mean loss of coverage.
To make the most of FCIC insurance, good records are essential. FCIC establishes unit-by-unit guarantees based on your individual production records going back ten years. These records are also invaluable in documenting claims and avoiding disputes.
- But also know your rights. Beyond the duties, FCIC insurance contracts also give farmers the right to insist that insurance companies and RMA live up to their side as well. If a dispute comes up, farmers can pursue them through the USDA National Appeals Division (for disputes with RMA) or arbitration before an independent fact finder (for disputes with a company). The key is to know the rules and follow them.
- Build a good team. Finally, there’s just no getting around the fact that crop insurance policies can be complicated: the rules, the economics, and the financial implications. Find a good agent to help you navigate them. A good agent will be your best friend in setting up your policy and avoiding problems down the road. Make him or her part of a team that also includes your local agronomic expert, your banker or Farm Credit lender, your marketing partners, your farm group, and your neighbors (often the best source of information in the end).
FCIC crop insurance does not have to be difficult. It takes homework. But if you make the effort, it can work for you just as it has for so many other farmers in recent years.
Ken Ackerman was Administrator of USDA’s Risk Management Agency from 1993-2001, and continues to represent clients from all parts of the crop insurance community.