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Contact:
John Shea, 202-690-0437
Lee Ziegler (202) 720-0191

WASHINGTON, Dec 17, 2007 - USDA's Risk Management Agency (RMA), along with State insurance departments, has launched an initiative aimed at increased enforcement of insurance rebating prohibitions. The initiative comes in response to the growing number of recent complaints and allegations of illegal rebates tied to Federal crop insurance purchases.

Rebating is a benefit provided to a producer which is contingent upon purchase of crop insurance from a particular company or agent. Examples of recent schemes with the hidden purpose of illegal rebating include creating special investment entities and recruiting producers as licensed sub-agents to write their own policies.

Section II.A.4 of the Standard Reinsurance Agreement (SRA) prohibits rebating of Federal crop insurance premium by approved insurance providers (AIPs) and affiliated agents and loss adjusters, except under certain conditions stipulated in the Federal Crop Insurance Act.

The joint enforcement initiative will increase the level of shared information with State insurance commissioners regarding government regulations, and SRA terms concerning illegal rebating of Federal crop insurance premiums. The initiative's objectives include:

• Notifying affected State when a Federal crop insurance rebating complaint or allegation is received;
• Providing background information on relevant past rebating investigations;
• Sharing specialized tools that assist in the identification of potential rebating (such as those developed from RMA's data mining capability);
• Sharing Federal and State legal expertise to analyze complex rebating schemes uncovered through investigations;
• Taking appropriate actions when violators of the respective laws are identified, and
• Informing affected States of penalties or sanctions to a rebating violator.

AIPs are encouraged to ensure that all employees, loss adjusters, and affiliated agents are fully aware of rebating laws, regulations, and prohibitions; the serious penalties which result from illegal rebating; and the coordinated efforts to address illegal acts or violators.

The initiative is expected to yield important rebating enforcement results leading up to spring 2008 insurance sales.

Managers bulletin: State and Federal Rebating Enforcement Initiative