BULLETIN NO.: MGR-96-041 TO: All Reinsured Companies All Risk Management Field Offices FSA Headquarters, Program Delivery and Field Operations FROM: Kenneth D. Ackerman Acting Administrator SUBJECT: Procedure for Transferring Policies from Farm Service Agency Local Offices to FCIC Approved Reinsured Companies BACKGROUND: The Federal Agriculture Improvement and Reform Act of 1996, (1996 Farm Bill) authorizes the Secretary of Agriculture to continue to offer Catastrophic Risk Protection (CAT) crop insurance coverage directly through Farm Service Agency (FSA) local offices to the extent that there is an insufficient number of approved insurance providers in a State or a portion of a State. The 1996 Farm Bill provides that CAT policies sold by FSA local offices in a State determined to have sufficient numbers of insurance providers available shall be transferred to private insurance companies reinsured by the Federal Crop Insurance Corporation. In accordance with the standards of the 1996 Farm Bill, the Secretary in consultation with approved insurance providers, has determined the States in which local FSA offices will no longer service CAT policies effective for the 1997 crop year. ACTION: For the 1997 crop year, the following States have been approved by the Secretary to begin the transfer of all CAT crop policies from FSA local offices to reinsured companies. The selected States are: Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota, Montana, Nebraska, North Carolina, North Dakota, South Dakota, Washington and Wyoming. Exhibit 1 describes the approved process to be followed by all insurance providers to assure the timely and efficient transfer of CAT policies from FSA local offices to reinsured companies. Attachment ---------------------------------------------------------------------------- Exhibit 1 Procedure For Transferring CAT Policies From FSA to Reinsured Companies A. FSA Local Offices (LO) will send letters notifying each producer that the local office must withdraw from the delivery of CAT, under the terms of FAIR Act. B. The letter will urge producers to transfer their policies to a local insurance agent. It will also instruct them to do one of the following: (1) visit a local agent; (2) visit the LO for a list of local agents; or (3) call a 1-800-number provided by participating reinsured companies. The notice will explain that if producers have not chosen an agent by August 16, 1996, that their policy will be assigned to a private reinsured company, which will arrange for the servicing of that policy. C. When the producer transfers voluntarily, the agent will send a copy of the Cancellation-and-Transfer Form to the LO in accordance with existing FCIC procedure specified in FCIC's Crop Insurance Handbook as well as in the CAT Handbook (18010 and 18100). D. Upon receipt of the Cancellation-and-Transfer form, the LO must copy and provide the policyholder's history including but not limited to the Application, Actual Production History, Acreage Report, any production records on file, Indemnity Summaries and other information readily available that may assist the assuming agent or reinsured company to establish the insured's coverage. E. The assuming reinsured company must secure a new application for each transferred policy. F. The LO will enter all cancel-and-transfers (voluntary or assigned) as well as all regular cancellations into their automated system daily for transmission to FCIC through the FSA data processing system. G. Local agents must submit applications to their companies daily, and the reinsured companies must submit Record Types 10 and 14 to FCIC through the Data Acceptance System on a daily basis. H. Producers who do not voluntarily transfer their policies by August 16, 1996, will be assigned by FCIC--on a random basis--to a reinsured company writing in the State. FCIC will notify the producer via data mailer, the reinsured company via electronic listings, and the LO through FSA's Kansas City Management Office of the transfer. I. CAT policies that have not been voluntarily transferred on crops with sales closing dates of December 31, 1996, or earlier will be assigned during the week of August 19, 1996. All other un-transferred policies will be assigned during the week of November 18, 1996. J. Once notified of policies assigned by FCIC, it will be the responsibility of the reinsured company to contact the insured within 10 business days. ---------------------------------------------------------------------------- Exhibit 1 (Cont.) K. Producers will have until the sales closing date to choose another reinsured company if they are not satisfied with the one assigned. Producers may also request the reinsured company to assign a different agent to service their policy. L. FCIC will not cancel policies during this process except where the producer signs a Cancellation Form or a Cancel-and-Transfer Form. Any policy missed in this process will be assigned when identified even if the assignment is after the sales closing date. M. If a producer voluntarily transfers a policy before the sales closing date and in the interim the policy is assigned to another reinsured company, the voluntary transfer will be binding. N. If a producer accidentally transfers a policy twice, the first transfer will be binding unless the two reinsured companies mutually agree otherwise. O. LO's in States designated by the Secretary under this process may not issue new 1997 policies. P. In the case of Arizona citrus fruit insurance, the LO must continue to service the 1997 policy, but may not issue any new 1998 policies. Q. The transfer process begins with crops with sales closing dates of September 30, 1996, or later. R. When a policy is transferred, all crops on the same policy, including those with later sales closing dates (e.g. spring crop policies) will be transferred, unless the insured has made other arrangements. S. CAT policies belonging to producers who already have buy-up coverage on other crops or non-high risk land with private insurers will be identified by FCIC and each reinsured company will be provided a list of those policyholders that are also insured by the company, who will be responsible to immediately contact these producers to arrange for the policy to be transferred. T. The LO's will continue to be responsible for servicing transferred policies with respect to 1996 and prior year transactions (e.g., claims settlements, disputes, etc.) and the assuming reinsured company will be responsible for all subsequent year transactions. U. Reinsured companies and agents will be required to service all eligible producers. Reinsured companies must accept and service all CAT policies transferred or assigned to them, as well as crop insurance applicants at all levels and for all crops in accordance with the Standard Reinsurance Agreement, as amended.