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Crop Insurance System is Working, But Problems Remain

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William Murphy

Federal Crop Insurance officials are traveling the country to make sure the claim process is going well in areas hard hit by the drought. Bill Murphy, administrator of the Risk Management Agency, met this week with Indiana farmers and crop insurance agents to provide assurance that the crop insurance system will be able to handle the massive number of claims caused by the drought.  On the Starkey Farm in Hendricks County on Tuesday, he said there would be enough money to pay all the claims and enough people to process them, “The companies have enough experienced field people to process the claims, so I feel the process will move along smoothly.” He said an early and prolonged harvest will also help spread the load over a longer period of time.

 

But farmers in the audience complained that, with insurance premiums coming due in September and no crop to sell, some farmers will be short of cash. Murphy said RMA has made changes to address this situation, “We have moved the deadline back to the end of October to allow for 60 days before the interest penalty kicks in.”  With a rate of 18%, most growers will want to avoid the interest penalty and get premiums paid before the deadline.

 

Cash may also be tight when it comes to purchasing inputs for next year’s crop. Murphy promised claims would be paid quickly, “Once the claim has been processed, we will have payments out in 30 days.” He said, in fact, some claims are already being paid. Not only will there be a lot of crop insurance claims, they will be big claims; and, for many, that will mean an audit. Murphy urged growers to start collecting paperwork now, “Start collecting your records now, don’t wait until the peak of harvest to go to the elevator and ask for records.”  He added, since many Indiana growers had a claim last year, those records may be enough. He indicated that once more than 5% of the claims in the state have been audited, RMA may relax the rules on auditing claims over $200,000.  He explained that because this is a federal program which uses tax payer dollars, these audits are necessary.

 

Murphy, who has more than 3 decades in the crop insurance industry, said this is by far the worst drought he has seen and will represent the biggest test for the crop insurance program to date.  He indicated that those farmers who participated in the Enterprise Unit program this year will find it will work very well for widespread drought claims. He told HAT he anticipates that the program, currently a pilot program, will become permanent in the next Farm Bill. Murphy also indicated that his agency was making changes to the crop insurance program that may keep rates unchanged next year, or even lower them in some cases.

[audio:https://www.hoosieragtoday.com//wp-content/uploads//2012/08/crop-insurencewrap.mp3|titles=Crop Insurance System is Working, But Problems Remain]