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For most farmers, crop insurance stays the same

DANIEL LOOKER 10/03/2013 @ 1:10pm Business Editor

Crop insurance companies are affected by the federal government shutdown, but because farmers have contracts with those private companies, most aren't likely to be affected.

In a telephone press conference, Senator Tom Harkin (D-IA) said Thursday that insurance companies are affected by the closing of USDA's Risk Management Agency.

"All local insurance companies in Iowa that are writing crop insurance, reimbursements to them are on hold right now," Harkin told Agriculture.com.

Steve Griffin, a crop insurance industry consultant at CVision Corporation in West Des Moines, Iowa, writes about some of the other effects of the shutdown for Agriculture.com:

First, thankfully, the farmer's contract of insurance is with private insurance companies, not the federal government. If a policyholder has a claim, his insurer is contractually bound to do its duty under the provisions of the policy. The federal shutdown has not erased any of these duties or the obligation to pay any and all insured claims." One insurer, Rural Community Insurance Services (RCIS), says it is "continuing to operate as usual and is directly paying all claims."

Therefore, farmers should proceed to report their probable losses to their agents as usual. Crop insurance providers may begin the normal adjustment process such as approving test strips, measuring grain bins, tallying grain elevator receipts, and making field appraisals and inspections.

One glitch, as long as the federal shutdown is on, is that county Farm Service Agency (FSA) offices are closed. Therefore, insurance adjusters will not have access to FSA-578s, photographic maps, and cropping histories to verify acres, new producer status, and eligible crop acres. Companies may have to delay final adjustment and payment until this documentation is available.

Farmers, agents, and adjusters who have relied on the RMA website as a quick source of policy and procedure information, actuarial documents, etc., will have to go elsewhere during the shutdown.

For very large probable losses (greater than $500,000), RMA must be notified and reserves the right to participate in the loss adjustment. However, the RMA must respond within three days if they desire to participate. RMA seldom does participate and with the shutdown, RMA will obviously not respond, and large claim adjustment will proceed as usual. Old large claims that RMA is participating in in the loss adjustment are affected by the shutdown.

In normal practice, crop insurers pay claims from a federal escrow bank account, which is replenished by RMA within 24 to 48 hours of issuance of the claim check(s). This escrow facility is also down during the federal shutdown, so crop insurers are funding the escrow with their own cash until the federal funding facility is reactivated.

Also important is that the federal shutdown does not delay the due dates for crop insurance premium. Even if crop claim payments are delayed. Unpaid premiums will still accrue interest charges at 1.25% per month or any part thereof after the due date.

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