Actions taken by the Nebraska Department of Insurance and USDA's Risk Management Agency (RMA) against American Growers Insurance Company in mid-December have effectively shut the company down. That will likely mean fewer insurance companies to handle your claims and more involvement from RMA.
It's too early to tell exactly why the company failed, says Ann Jorgensen, director of external affairs for RMA, but difficult growing conditions this past year were key.
The company, which helped develop Crop Revenue Coverage (CRC) and Group Risk Income Protection (GRIP), referred to itself as the “world's largest provider of crop insurance” in its 2001 annual report. It did business under the name American Agrisurance or AmAg, and is a subsidiary of Acceptance Insurance Companies Inc. (AICI), a holding company founded in 1969.
Because the company was such a player in the development and sale of revenue insurance policies, the future of CRC and GRIP is now in question.
“CRC will be available for the 2003 crop year,” Jorgensen emphasizes. “However, the responsibility for CRC (and GRIP) rests now with RMA.”
CRC has grown in popularity in recent years. In 2002 it was the single most popular form of crop insurance sold for corn, according to the Federal Crop Insurance Corp. At least 160,000 policies were sold covering more than 21 million acres.
To minimize the impact of farmers holding policies from American Growers, RMA has stepped in and is serving its role as regulator and ultimate backer of affected policies, says Jorgensen. “The priority is to make sure all 2002 claims are being paid in a systematic and expeditious way, to make sure farmers have access to insurance for 2003 and that taxpayers pay no more than necessary,” she adds.
In addition, to ensure this failure is not the start of a growing situation within the industry, Jorgensen says RMA is taking immediate action, including:
Talking one-on-one with the presidents of each company licensed to write crop insurance about the health of their businesses.
Sending out financial review teams to selected companies to review operations.
Requesting additional financial information for evaluation from all participating companies.
“That (industry health) obviously is a big concern because the area of crop insurance is a big concern,” Jorgensen says.
The failure of American Growers Insurance will also have immediate consequences for other companies in the industry. In recent years, the company has formed numerous partnerships to market new risk-management products with companies such as The Andersons and Koch Industries.
For one company, USAG Insurance Services, the development spells the end of a profitable business. USAG, which services Texas, Oklahoma and New Mexico with roughly 140 offices, used American Growers Insurance to write its policies. Officials there told Soybean Digest that this development has “put them out of business overnight.”
Says company president Tom Buchanan, “We were caught without much notice, and we're finding there are real capacity problems within the industry.”
Buchanan explains that other companies either can't handle the volume USAG would provide, or they were unwilling to take policies from areas that are considered high risk, which is most of the area USAG serves.
Jorgensen advises policyholders with questions to first talk to their agents and, if needed, contact American Growers at 800-999-7475. If they're still unsatisfied, they should contact RMA at 800-205-9953.
For now, it appears the process of cleaning up the pieces is going well. “We recently issued guidelines to help ensure the timely transfer of business from American Growers to other insurance companies. Thus far, we've not had many calls,” Jorgensen says.
| Million Acres | % Of Acres | |
|---|---|---|
| Crop Revenue Coverage (CRC) | 21.3 | 36.3 |
| Actual Production History (APH) | 18.9 | 32.2 |
| Revenue Assurance (RA) | 16.4 | 27.9 |
| Group Risk Protection (GRP) | 1.0 | 17.0 |
| Income Protection (IP) | 0.6 | 1.0 |
| Group Risk Income Protection (GRIP) | 0.5 | 0.9 |
| Source: Federal Crop Insurance Corporation | ||