FACTS!

Prevented Planting (PP)
Excessive/Inconsistent Yields & Insured Acreage Limitations
Substantial Beneficial Interest (SBI)
Claims over $100,000
Forming of Partnerships
Changes via Telephone
Double-checking Schedules of Insurance
Record Keeping
Premiums versus Claims



Prevented Planting (PP)

As per policy language in Section 17(a) for the 2005 Spring crop year a producer will be eligible for a prevented planting payment if:

- You were prevented from planting the insured crop by an insured cause that occurs on or after the sales closing date contained in the Special Provisions for the insured crop in the county for the crop year the application for insurance is accepted.

Section 17(d) of the policy states that: Drought or failure of the irrigation water supply will be considered to be an insurable cause of loss for the purposes of prevented planting only if, on the final planting date (or within the late planting period if you elect to try to plant the crop):

- For non-irrigated acreage, the area that is prevented from being planted has insufficient soil moisture for germination of seed toward maturity due to a prolonged period of dry weather.
- Prolonged precipitation deficiencies must be verifiable using information collected by sources whose business it is to record and study the weather, but not limited to, local weather reporting stations of the National Weather Service.

The total number of acres eligible for prevented planting coverage for all crops cannot exceed the number of acres of cropland acreage in your farming operation for the crop year, unless you are eligible for prevented planting coverage on double-cropped acreage in accordance with section 17(f)(4).

Excessive/Inconsistent Yields & Insured Acreage Limitations

There are several policy changes for the Spring 2005 crop year that can affect the number put in the database in reference to production reporting. As per policy language, if insureds can provide verifiable records to support excessive actual yields that are significantly different than other producers’ actual yields in the county or other actual yields reported for the insured’s farming operation AND the insured CAN prove there is a valid basis to support the differences in the yields, Insurance Providers may request an increase to the maximum yield edit level. If the Risk Management Agency (RMA) increases the maximum yield edit level to the actual yield, the actual yield is used.

However, if the insureds provide verifiable records to support actual yields AND the insured CANNOT prove there is a valid basis to support the differences in the yields, the approved APH yield will be reduced by replacing excessive actual yields with the:

- Simple average of all actual yields and assigned yields for the same crop year for the Practice/Type/Variety and the T-Yield Map area for the crop in the county. If the simple average of the actual yields is greater than the maximum yield edit level, limit the excessive actual yield to the maximum yield edit level. Use a applicable actual yield descriptor to identify the simple average actual yield used instead of excessive actual yields; OR
- The applicable county T-Yield, as indicated by Paragraph 5A(8) of this procedure, if the insured has no other applicable actual yields.

If insureds DO NOT provide verifiable records to support excessive actual yields, the approved APH will be reduced by replacing each excessive actual yield with an assigned yield that is .75 times the approved APH yield for the previous crop year; OR, if an approved APH yield was not calculated for the previous crop year, 75 percent of the applicable county T-yield.

Inconsistent yields are slightly different from excessive yields, but are still re-calculated when found. Inconsistent approved APH yields are approved APH yields, calculated for databases containing at least one actual of assigned yield that exceeds 115 percent of:

- The simple average of ALL of the insured’s approved yields for the crop whose databases contain actual/assigned yields; OR,
- The applicable county T-yield if no other applicable databases containing actual/assigned yields exist for comparison

The reduced approved yields apply to ALL insured acreage involved, not just the acreage that exceeds the limits. Example, 320 acres exceed the approved yield, but you farm 400 acres – the reduction applies to all 400 acres.

Insured acreage limitations is the third area that is being closely examined by companies to determine if there are abnormalities. Insured acreage exceeds the limitation permitted by the policy if the current year’s insurable acreage is greater than 400 percent of the average acreage with actual/assigned yields reported for APH purposes for the database.

Insured acreage also exceeds the limitation permitted by the policy if the acres for two (2) or more APH crop years with actual yields reported for the database are each less than 10 percent of the insurable acreage for the current crop year.

Substantial Beneficial Interest (SBI)

SBI’s include Social Security Numbers (SSN), name, address and phone number. SBI rules are now more extensive and specific. The following is information about how SBI’s must now be broken down and listed:

- Corporation XYZ is made up of two partnerships.
   o Partnership A
   o Partnership B

(Under the 2004 Basic Provisions the Tax ID numbers for Partnership A & B and Corporation XYZ would only have to be listed).

Under the 2005 Basic Provisions the individuals and their SSN’s that make up Partnerships A & B must now be listed, along with the Tax ID’s for the Corporation and the Partnerships. This is only applicable to the individuals if they have at least a 10% interest in the partnership.

All SBI information must be provided to the insurance agent by the applicable Sales Closing Date (March 15th). Failure to provide correct SBI information will result in:

- A reduction of your share or
- Policy cancellation.

Claims over $100,000

Claims over $100,000 now require a three (3) year Actual Production History (APH) audit. This should not be a problem for producers, as we and you, should have hard copy evidence of your production. This is not wholly uncommon, as claims this big in the past have required a review; the three (3) year APH review is just new.

Forming of Partnerships

Partnerships and other group entities must have paperwork completed and a Tax ID number to us by Sales Closing Date (March 15th). If we do not have the correct SBI information on or with the application by March 15th the policy will not be in effect. Bottom-line: If you are forming a partnership, you must have the necessary paperwork completed and a Tax ID number to us by March 15th.

Changes via Telephone

*IMPORTANT* Changes, corrections or additions to policies will no longer be submitted to the company via a telephone message from the producer. To protect you and us, we must speak with you in person with regards to changes to a policy and the appropriate forms will need to be signed by you before we will submit the change.

Double-checking Schedules of Insurance

Due to new policy language in the 2005 Spring Crop Basic Provisions any errors on the schedule of insurance must be identified and we must be notified by you prior to the applicable Acreage Reporting date. Errors found after the Acreage Reporting Date are very difficult to correct and producers may incur penalties from the company for the right to make the corrections. REMEMBER: Liability can only be decreased if a problem is found, liability may not be increased. In either case, it will be the company’s decision whether or not to allow these changes.

Record Keeping

With the new Standard Reinsurance Agreement between the companies/agents and the government and the new policy language in the 2005 Basic Crop Provisions, it is a necessity that the producer and the agent have copies of three (3) years of APH history. To protect you, the producer, it is a good idea for you to keep at least ten (10) years of APH history. Although it seems like a cumbersome exercise, random audits and reviews are becoming more common in order for the companies to remain in compliance with the new rules regarding Fraud, Waste and Abuse.

Premiums versus Claims

Although this is current and past policy language, the companies are putting more emphasis into premiums being paid timely with the risk of cancellation greater regardless of claims status. It is just not worth the risk of delaying premium payments because of a pending loss. The risk of cancellation is becoming too great to put your crop security at risk. Bottom-line: Pay your premium timely regardless of a pending loss.