Mike Sieben Senior Vice President

National Crop Insurance Services

National Crop Insurance Service serves as the primary service organization for the crop

insurance industry.

MPCI and Crop-Hail Program Development and Analysis

◦ Policy Analysis, Loss Adjustment Procedures, Legal Analysis, Agronomic Research

Economic and Actuarial Analysis

Education and Training

◦ Loss Adjuster Schools – 17 (1,692 attendees)

◦ National Conferences – 5 (1,037 attendees)

◦ Annual Regional/State Meetings – 14 (531 attendees)

Crop-Hail Advisory Organization and Statistical Agent

◦ Licensed by Individual State Insurance Department

Public Relations and Industry Outreach

NCIS Website www.ag-risk.org Crop Insurance in America Website www.cropinsuranceinamerica.org Support Crop Insurance Website www.supportcropinsurance.org Twitter @USCropInsurance Facebook CropInsuranceInAmerica YouTube NCISAmerica

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Combined Business 2011 – 1 Year ago to date

2012 – Crop Year to date

Policies with Premium 1.1 M 1.1 M

Net acres insured 263.5 M 281.4

Liability $ 113 B $ 116 B

Premium $ 11.9 B $ 11.0 B

Indemnity $ 4.4 B $ 3.5 B

Loss Ratio 37% 32%

Iowa Net Acres Liability Premium Indemnity Loss Ratio

Corn 12.9 M $ 10.4 B $ 626 M $ 151.9 M 24%

Soybeans 8.5 M $ 4.3 B $ 258 M $ 26.1 M 10%

Grand Total Iowa As of10/29/12

Net Acres 21.6 M

Liabilities $ 14.9 B

Premium $ 899.6 M

Indemnity $ 178.7 M

Loss Ratio 20%

To make you aware of the various reviews that are required under Appendix IV of the Standard Reinsurance Agreement (SRA) and what is required of the Approved Insurance Providers (AIPs).

To discuss what is needed in the form of production records to comply with the various required reviews.

Standard Reinsurance Agreement (SRA) Appendix IV – Quality Assurance and Program Integrity ◦ Section III – Quality Control Guidelines

The company is responsible for

Establishing a system of internal controls…

Conducting all quality control reviews using objective and unbiased individuals….

Conducting an inspection

Timely detection and timely reporting of fraud, waste or abuse by policyholders, employees or affiliates…

Definition of Inspection according to the Standard Reinsurance Agreement: ◦ “Inspection” means verification:

(1) As to whether the application, production

report, acreage report, notice of claim, or other relevant documents in accordance with FCIC procedures in the 2012 SRA were timely submitted;

(2) Of the information reported on the documents:

(A) Referenced in (1) above, and related to the claim, including preliminary and final loss adjustment (Verification of the approved yields will consist of examination of the records supporting the last three years certified for the crop); and

(B) Related to pre-harvest, growing season, or pre-acceptance examination of the crop;

◦ (3) That policy documents, including, but not limited to, actuarial documents, have been properly used and applied;

◦ (4) That the reported practice is being carried out in accordance with good farming practices;

◦ (5) That the crop has been planted, or replanted as applicable;

◦ (6) That the policy constitutes an eligible crop insurance contract;

◦ (7) That the producer qualifies as an eligible producer; and

◦ (8) That the agent or loss adjuster has complied with FCIC procedures.

Appendix IV ◦ Quality Control Guidelines

AIP is Responsible for:

Notifying FCIC of suspected fraud, waste or abuse…

Implement procedures to resolve and correct errors and omissions

Correct errors and omissions………

Maintain all documentation………….

Establish a procedure to respond to complaints by policyholders, the public, State Insurance Departments……

Submit an annual Quality Control Report by April 30th…….

Data Mining Reviews ◦ The AIP shall conduct an inspection of eligible

crop insurance contracts for which anomalies have been identified by FCIC.

◦ The data warehousing and data mining techniques are used to identify agents, loss adjusters and producers that exhibit “anomalous” claim outcomes.

◦ Although anomalous behavior is not considered evidence of fraud, waste and abuse, it is an indicator of situations that may warrant further examination.

Cashing in on High Yields – trying to lose old yields

Entity Switching - files as a new entity but farms the same land

New entities – claiming to be a new producer

Anomalous New Tax ID –filing for a new tax ID

Modified Acreage Report or Claim - changing AR after claim

Producers Adding and Dropping Yields- dropping low - adding high

Loss Units Changed –trying to change actual yields on a loss unit

Copied Yields – report as Irrigated when it was actually NI

Yield Switching – shift production from one unit to another

Excessive Yields – large actual yields, files fewer claims

Isolated disasters - single producer files a total loss in county

New Excessive Yields – high yields and files a loss first year

Individual Policy Reviews

◦ The AIP shall conduct inspections or monitoring

programs of eligible crop insurance contracts, entities, agents, loss adjusters, or affiliates identified by FCIC as may be determined necessary by FCIC to protect program integrity.

Conflict of Interest Reviews

◦ The AIP shall, prior to any payment of a claim,

conduct an inspection for all eligible crop insurance contracts for which a conflict of interest has been disclosed…

A Conflict of Interest review is mandatory when the individual making a disclosure:

Has a share in a crop insured…

Has a relative with a substantial beneficial interest…

Consecutive Loss Adjuster Reviews ◦ The AIP shall conduct an inspection of at least:

15% of eligible crop insurance contracts where the same adjuster has signed a claim for indemnity in 3 consecutive claim years for their AIP

15% of eligible crop insurance contracts where the same adjuster has signed a claim for indemnity in 3 consecutive claim years between multiple AIPs

$ 200,000 Indemnity Reviews ◦ The AIP shall identify and conduct an inspection

on any eligible crop insurance contract with an indemnity of $200,000 or more where:

For prevented planting losses and all other losses

Any single indemnity exceeding $200,000

Any aggregate indemnity, including claims that were closed, and subsequent claims exceeding $200,000

Date $ 200 K Claims All Claims Percent of All Claims

10/22/2012 1,393 191,921 .73

$ 100K Claims

10/24/2011 8,397 224,076 3.75

Rainfall Index and Vegetation Index Reviews ◦ The AIP shall perform acreage/colony reports

reviews not later than 120 days after the reporting date for the crop……………… Reviews are required for:

Contract receiving indemnity if a COI has been reported,

If a written application for acreage reduction has been made,

Not less than a 3% sample for all crop insurance contracts

Review shall include verification:

Actual acres

Actual colonies versus Insured colonies

Insurable interest/share

Insurability of the insured acres

Actual Production History (APH) Verification ◦ The AIP is required to review and verify the records

used to establish the APH for an eligible crop insurance contract.

For the first year in which a crop is insured, review all years of records used to support the APH to ensure the records are complete and reported

For continuous contracts

Review and verify the most recent year of records

If an E&O is identified

Actual Production History (APH) Verification For continuous contracts

Review and verify the most recent year of records

If an E&O is identified but when corrected does not affect the current years premium or liability, determine that the remaining years of records do exist

If an E&O is identified but when corrected does affect the current years premium or liability and prior years records exist, conduct a review and verify all records are available for such review

If records do not exist for any year, apply the yield adjustment requirements

Large Claim Reviews $ 500,000

◦ The AIP shall notify RMA upon receiving notice of a

potential claim on an eligible crop insurance contract where the production loss or indemnity is likely to exceed $500,000

◦ RMA at this point will elect one of the following:

Participate in the loss determination before and agreement is reached

Decline participation of the review of the claim

Reminder: For 2012

◦ $ 200,000 reviews include the production totals

either harvested or appraised along with the revenue portion of the loss

◦ $ 500,000 reviews only uses production totals not expected revenue losses

Have production records available from the last 3 years

◦ For a 2012 Crop Claim; records from 2011, 2010

and 2009 are required

If no acres of that crop were planted in 2009, the records from the 2008 crop year are required

Separate production records

◦ Keep separate by Crop

◦ Keep separate by Year Harvested

◦ Keep separate by Practice and Type

◦ Keep separate by Unit

Match production records by FSA – 578 ◦ Keep separate production records by legal

description so that they will match with the unit

Farm Stored Grain ◦ Either have FSA, AIP Adjuster or a disinterested

third party representative measure the bin, include Unit #, FSA # and legal location

Make sure that grain is separated by crop year

Grain sold to an elevator ◦ Settlement sheets should show 100% of the

production

◦ Mark loads by legal description and unit number

Fed Production ◦ Maintain written records of fed production

Amount of grain fed, number and kind of livestock, estimated average weight of livestock,etc.

Crop Insurance Handbook has guidelines

Combine Monitor Records ◦ Print combine monitor records and keep with your

settlement sheets

Include

Location of field

Name of crop

Date

Harvested bushels or pounds

Unit number and field ID

Enterprise unit - All insurable acreage of

the insured crop in the county in which you have a share on the date coverage begins for the crop year.

◦ Reminder: Insured may still want to keep all

production records separate by legal description

AIPs may differ in what they want but here is our list of items the reviewer may want to see or ask about:

◦ 1) Were production records/ledger sheets marked by legal, Farm Number, practice and unit number

◦ 2) Are all production worksheets, appraisal worksheets, bin measurements, ledger/settlement sheets, FSA 578, maps attached

◦ 3) Have records been confirmed with buyer

◦ 4) Are acres and production confirmed on all units

◦ 5) Were quality adjustments factors applied

◦ 6) Was there any added land on the policy

◦ 7) Are all acres of the crop accounted for E.G. Insured and Uninsurable