Risk Management Agency Program Announcement

JOINT INITIATIVES ANNOUNCED TO CURB PROGRAM ABUSE

Contact: Ken Ackerman (202) 690-2803
RMA.mail@rma.usda.gov

WASHINGTON, Feb 29, 2000 - The Department of Agriculture's (USDA) Risk Management Agency (RMA), which administers the federal crop insurance program, and the private insurance companies that deliver the product to farmers, today announced a major joint commitment to increase program oversight. This commitment is being backed by specific joint initiatives to strengthen program integrity, protect taxpayer dollars, and better assure that those who deliberately break the rules are caught and punished.

"The vast majority of people in federal crop insurance -- farmers, insurance agents, loss adjustors, industry professionals, and government employees -- are honest, hard-working men and women acting with the highest integrity and competence," said RMA Administrator Ken Ackerman. "It is grossly unfair to tarnish them or the program with the bad actions of a few."

Crop insurance has expanded rapidly over the past few years into new crops, types of coverages and geographical areas, which has been of great benefit to farmers. But it has also created the need for stronger program oversight. Working with RMA on the same priorities will go a long way toward improving integrity," said Roger Swartz, Chairman of the Board, Crop Insurance Research Bureau (CIRB).

Among the steps to be taken by RMA and its industry partners include:

• Reviewing legislation currently pending before Congress to determine whether additional provisions are needed;
• Aggressively implementing a recently-completed Business Process Re-engineering plan focused on targeted oversight reviews, shared program integrity roles, and better communications;
• Developing an error rate measurement tracking system that will credibly document the performance of federal crop insurance program delivery;
• Establishing through RMA a heightened system of coordination between participating companies and USDA's Office of Inspector General to address potential vulnerabilities;
• Developing an effective early warning system for RMA and industry staff to detect and address program flaws at the field level.
• Using new technologies, such as pattern recognition and data mining systems, to detect potential abuses or program vulnerabilities at an early stage;
• Establishing Special Investigative Units (SIUs) and other state-of-the-art methods commonly used in the commercial property and casualty insurance industry to address crop insurance abuse; Providing targeted training for loss adjusters on detecting fraud or collusion in judging claims; Coordinating with other USDA offices and solicitation of public input through the OIG's fraud "hot-line" system and industry hot lines.

The federal crop insurance program has grown dramatically in recent years, almost tripling in size since the early 1990s. The program now delivers over $31 billion in insurance protection covering a wide diversity of crops. More than one million policies insure almost 200 million acres of farmland nationwide. The program will pay farmers some $2.2 billion to cover losses on 1999 crops caused by drought, hurricane, rains, and other natural disasters.

Program reviews and investigations are conducted by RMA's Compliance staff working in conjunction with the participating private companies. USDA's Office of Inspector General audits the program and conducts investigations into allegations of wrong doing. Where there is evidence of fraud, OIG develops and then refers these cases to the US Department of Justice for prosecution. There is a relatively small number of such cases. RMA and its partners also guard against program abuse. Many allegations of fraud concern program abuse, where individuals in isolated areas take unfair advantage of weaknesses in the policy (rates, policy provisions, procedures).

Also joining RMA in the announcement were the other insurance trade associations, representing all seventeen companies now participating in the Federal crop insurance program: the American Association of Crop Insurers (AACI), and the National Crop Insurance Services (NCIS).

Ron Brichler, Chairman of NCIS, said, "We have a vested interest in rooting out fraud and abuse. The companies we represent have money at risk and are in this business for the long haul. NCIS has a great deal of expertise that will be useful in achieving the oversight initiatives we"ve identified with RMA."

Ben Latham, Chairman of AACI, echoed Brichler's comments saying, "Having now identified some common priorities, we believe that RMA can begin making systematic changes to improve program integrity."