Officials Target ‘Rebating’ in Federal Crop Insurance Sales

Farmers and insurance agents who sell federal crop insurance policies may soon be required to certify that they are not participating any rebating or incentive schemes related to the sales of those policies.

The 2008 federal farm bill prohibits the practice of rebating in conjunction with the federal crop insurance program, but apparently not all agents have gotten the message.

Testifying before the National Association of Insurance Commissioners’ Crop Insurance Working Group on March 26, the federal Risk Management Agency’s Dave Miller explained that traditionally during the spring sales period “from January to March 15, we end up with some rebating activity.”

The RMA is looking at ways to curb the practice. “One of them we’re looking at right now is the possibility of putting in a certification statement in some of the policies,” he said.

The document would be signed by both the agent and the farmer. “The agent would be certifying to the fact that he did not provide any type of inducement to the producer (farmer) and the producer signing that they did not receive one from the agent,” Miller said.

South Dakota Insurance Commissioner Merle Scheiber, chair of the working group, said he appreciated “the conscious effort to address the rebating issues. Because in my office, and I’m sure those of the other committee members and members of the NAIC, it’s guaranteed that you get those calls this time of year.”

Scheiber asked whether there are any consequences when rebating occurs even after the documents are signed.

Miller said that reinsurance for those policies that were placed in conjunction with a rebate or incentive from the agent can be revoked. “Currently, if we find rebating activity out there we’ll contact the company and … follow with a cease and desist letter basically stating that this has to stop, and that we will not reinsure any of these policies. … We have that authority and can exercise it to varying degrees based on how bad the grievance is,” he explained.

Miller said the RMA is considering including the rebating certificate requirement in the draft document of the crop insurance standards handbook for 2012.