RH News | Archive

Section 400.716(g) – We believe the word “revived” should be “revised”.

Section 400.716(i) – This section indicates that a financial reserve plan must accompany PRP proposals, and that the reserve plan must trigger immediately upon discovery that the total dollar amount of the actual efficiency is not sufficient to cover the total dollar amount of the PRP. We do not disagree with the proposal for a financial reserve plan, and believe that those plans should provide for actions that will result in greater than the proposed 25% of the projected total dollar premium reduction (we suggest 50%). How does RMA propose to discover that the reserve plan should trigger, and when will that discovery occur? It seems like it could and will only occur well after the fact.

Section 400.716(j) – We recommend that RMA require a PRP applicant to provide copies of all profit sharing arrangements rather than a “detailed description.”

Section 400.716(l) – We agree with the requirement to submit marketing plans to states. We urge RMA to require state approval from all states in which a company intends to offer PRP and it operates BEFORE a company can offer PRP. State approval is appropriate for PRP because of rebating concerns and because states will be involved in overseeing agent marketing practices and responding to complaints regarding those practices that involve questions relating to state laws, as is currently the case. The manner in which the regulation is outlined leaves RMA half pregnant on this important state oversight responsibility. For example, if a company offers PRP and subsequently receives a notice from the state that the marketing plan is not approved, what should the company do if insurance policies have already been sold under RMA’s approval and sales closing dates have passed? Or what if a company that operates in 48 states receives approval from 47 states and disapproval from 1 state? Since the company is required to offer PRP in all states in which it operates per the proposed regulation, how will RMA reconcile the discrepancy?

Section 400.717 – This section proposes to allow amortizing start up costs for new providers over a period of up to three years. We strongly disagree with this proposal as it unfairly discriminates against existing companies. Moreover, we believe that any company should demonstrate an ability to offer and service policies while meeting all the requirements of the crop insurance program for a period of 3 to 5 years before it is eligible to offer PRP. How else will RMA determine if service is degraded (section 400.719(a)11)? How else will RMA determine that the PRP does not adversely impact the financial and operational capacity and expertise of the approved insurance provider to properly deliver the Federal crop insurance plan (section 400.719(a)(14))? Moreover, costs are costs. In the real world, a significant percentage of companies fail before getting off the ground. The primary reason is the inability to recover startup costs. Since a significant portion of the proposed rule is dedicated to ensuring that a PRP does not jeopardize the financial ability of the company, all costs should be counted equally.