Crop Insurance Today - 18

Figure 16 2016 Causes of Loss

States with low loss ratios for the yield plan tended to have low loss ratios for revenue plans, while
states with relatively high loss ratios for the yield
plan also tended to have high loss ratios for revenue plans. Revenue plan loss ratios exceeded yield
plan loss ratios by 0.20 points or more in Alaska,
Arizona, Nevada, New York, Oregon, Vermont,
and Wyoming, which cumulatively contributed
only $57 million in premium to the program.
Conversely, yield plan loss ratios exceeded revenue plan loss ratios by 0.20 points or more in Louisiana, Massachusetts, Minnesota, New Mexico,
and Rhode Island, of which only Louisiana and
Minnesota have any significant amount of premium. On a countrywide basis, the loss ratios were
0.31 for RP, 0.28 for RP-HPE, and 0.57 for YP. Actual Revenue History, at 1.22, was the only plan
having a loss ratio exceeding 1.00 on a countrywide basis, with almost all the indemnities attributable to cherries. The Vegetation Index program
had a loss ratio of 0.95 but on a small amount of
premium, while the APH plan, with more than
$900 million in premium, had a loss ratio of 0.85.
Figure 16 shows the major causes of crop
losses for 2016. Excess moisture was the primary cause, responsible for 41 percent of all losses.
Drought was responsible for another 15 percent,
followed by hail with 11 percent. Price changes
were responsible for only three percent of all losses due to the stability of crop prices throughout
the year. Heat and wind contributed seven percent
and three percent of all losses, respectively.
[The primary information source for this section
was the RMA Summary of Business.]
18

MAY2017

Program and Policy
Developments
In 2016, the RMA continued to work on the
Acreage and Crop Reporting Streamlining Initiative (ACRSI) with a goal of the development
of one-stop reporting of acreage information. A
limited pilot program was conducted in spring
2015 in Illinois and Iowa. The pilot program allowed farmers to complete their acreage reports
with their insurance agent, their FSA county office, or a specified third party. The pilot program
included seven crops and two land uses: alfalfa,
corn, grass, oats, rye, soybeans, wheat, fallow
land, and Conservation Reserve Program(CRP)
land. The lessons learned from the pilot program
were incorporated into another pilot program for
crops with fall 2015 reporting dates. The fall pilot
program expanded the area for the same crops by
an adding 13 more states. The fall pilot included
all farmers in all counties in Arkansas, Delaware,
Georgia, Illinois, Indiana, Iowa, Kentucky, Maryland, Montana, North Carolina, North Dakota,
Pennsylvania, South Carolina, South Dakota,
and Tennessee. For spring 2016, the ACRSI was
expanded to all 50 states and included four additional crops: cotton, peanuts, rice, and sorghum.
It is expected that the program will continue to
evolve with improvements in common data reporting methodology based on lessons learned in
the initial nationwide experience.
In a related matter, RMA continues to emphasize the importance of tracking the location of
land enrolled in common crop insurance policies

and area risk protection insurance policies. In the
2016 crop reinsurance year, all Approved Insurance Providers (AIPs) were to report 100 percent
of total acreage by field location. Land locations
are identified by the Farm Service Agency (FSA)
serial number or common land unit (CLU) number. In the 2016 reinsurance year for cases where
a CLU does not exist, RMA began working with
AIPs to develop the resource land unit (RLU) data
standard that identifies field locations that could
be used in reporting. It is believed that the location data will improve program integrity by allowing better understanding of geographical patterns
of insurance claims and associated production
risk. Beginning in the 2017 reinsurance year, field
locations on acreage reports will be required for
CCIP and ARPI plans: yield protection, revenue
protection, revenue protection with harvest price
exclusion, area yield protection, area revenue protection, and area revenue protection with harvest
price exclusion.
In addition, efforts to improve program integrity measures continue with refinements to
the estimates of improper payment rates for the
program as a whole and individual AIPs. A more
comprehensive sampling methodology was developed and has been approved for use in 2017
and beyond. The improper payment rate is a standardized measure of waste and efficiency for all
major federal spending programs. An improper
payment occurs when funds go to the wrong recipient; when the correct recipient receives too little or too much; or when the recipient uses funds
in an improper manner. Many errors are simply
rooted in data entry and reporting mistakes. Crop
insurance's 2016 improper payment rate of 2.02
percent was down from 2.2 percent in 2015 and
5.58 percent in 2014. By comparison, the government-wide improper payment rate was 4.67 percent in 2016 and 4.39 percent in 2015.
Making improvements to existing programs
continue to be a major focus for RMA. In some
cases, additional information on a product may
be needed so pilot programs may be extended.
For example, the Actual Revenue History (ARH)
policy pilot program used to provide coverage for
Strawberry farmers in California since the 2012
crop year was extended for another two years in
2016. In other cases, pilot programs can be converted to permanent program status. For example,
in 2016 the FCIC approved the conversion of the
Florida Fruit Tree policy to permanent status, a
move that included orange, grapefruit, lemon,
lime, avocado, carambola, mango, and other citrus growers in the state. Other changes include ex-

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