A congressional effort to force the U.S. Department of Agriculture to use its employees to sell federally subsidized crop insurance may be ending in a sales drought.
The department's Federal Crop Insurance Corp. says those federal employees, authorized since January to market the policies, have sold only two of them in that time. Private insurance agents believe themselves close to their goal of stopping sales of such policies by government staffers.The ill-starred effort to foster sales through government offices was intended to reduce the government's net losses from the crop insurance program. In response to congressional language in three successive Agriculture Department appropriations bills, the Federal Crop Insurance Corp. spent $140,000 training one employee in each state to handle insurance sales. Sales by private agents continued as before.
Jane Wittmeyer, the corporation's deputy manager, said it will look at whether to shift the sale of the policies, which produced $667.5 million in premiums last year, solely to private-sector insurance agents.
The program is used to protect farmers from catastrophic losses that could devastate the nation's agricultural base.
"I don't care whether it's two policies that are sold (by government employees) or 5,000 policies, the fact is you've someone selling insurance that shouldn't be selling insurance because they are not properly trained and licensed by the state insurance departments," said Timothy P. McKone, Washington representative with the Independent Insurance Agents of America, based in Alexandria, Va.
The pressure from Congress to compete with private agents was largely the work of Rep. Jamie L. Whitten, D-Miss, chairman of the House Appropriations Committee and its agricultural subcommittee.
The subcommittee sought to reduce the government's losses under its standard risk-sharing arrangement with private insurers.
Since the 1985 harvest, the government has lost more than $1.64 billion on the program, while private insurers earned $157.2 million for their efforts. During the 1991 crop year, the government lost $190.2 million while private insurers earned $56.7 million.
A major reason for this is that the government is assuming approximately 86 percent of the risk. When losses reach $3 for each $1 of premium, the government begins picking up nearly the full amount of the loss. When the loss hits $5 for each $1 of premium, the government picks up all the remaining losses. The government's compact with private insurance companies accounts for 90 percent of the federal crop insurance program.
Most insurance agents don't sell much crop insurance, but many of those who do have turned it into a sizable segment of their business.
For instance, a 12 percent commission that Johnson & Sons Inc. collects for selling the government program to farmers produces roughly $18,000 in revenue for the Dayton, Iowa, agency each year.
Compared with government employees, "We are more qualified, licensed and attend continuing education classes each year to maintain our expertise," said Mark Cleaver, vice president of Johnson & Sons.
"An independent system of any kind can do a better job than federal agencies in bringing goods and services to the general public," he said.
Mr. Cleaver said his agency produces between $3 million and $3.5 million in annual premiums. Crop insurance accounts for close to 5 percent, or $150,000, of the volume generated by his three offices. That would be missed if the government took over the sale of crop insurance, he added.
"There are a lot of agents who have almost their entire block of business with crop insurance."
Some of those agents were former federal crop insurance employees who had been selling and servicing the policies when the program was restructured to include sales by private sector agents beginning in 1981, he noted.
From the program's creation in 1938 until then, the policies had been
marketed exclusively by the federal government.
Donald E. Suhr, president and owner of Suhr and Imig Insurance Agency Inc., of Seward, Neb., said he opposes using federal employees to sell crop insurance using government money to pay for the sorts of expenses that he must cover on his own.
"I have to furnish my own office, pay my own employees, provide benefits," said Mr. Suhr, who is the national crop insurance representative for the National Association of Professional Insurance Agents. "If that federal employee doesn't sell a policy, he's still going to get his paycheck at the end of the month.