INFORMATIONAL MEMORANDUM: R&D-95-022 TO: All Reinsured Companies CFSA Headquarters, Program Delivery & Field Operations All Risk Management Field Offices FROM: Tim B. Witt Acting Director Research and Development Division SUBJECT: Planned Initiatives for the 1996 and Succeeding Crop Years Attached for your information are the Research and Development Division's planned actions to convert the remaining multiple peril crop insurance policies to the common crop insurance policy format and other important program initiatives. Also included are planned initiatives affecting actuarial and data systems re-engineering and simplification. These plans provide program changes for the 1996/1997 crop years. These plans are based on RED's best estimates of the time needed for action and provide the utmost opportunity for program changes to be completed. This will assist in timely training and distribution and incorporation of changes for subsequent crop years so that producers can make timely and informed risk management decisions. Not all program changes can be anticipated. Some changes may be mandated by initiatives such as the 1995 Farm Bill; however, known program improvements and/or suggestions to simplify the Federal crop insurance program will be considered and implemented as we move forward with these plans. Attachments ----------------------------------------------------------------------------- Policy Development Project Plan for Crop Years 1996 and 1997 1996 Crop Insurance Policies 1. Revisions to existing policies A. Catastrophic risk protection endorsement and subpart-T general administrative regulations implementing crop insurance reform - Respond to comments received - Revisions and clarifications as a final rule in the Federal Register B. Revisions to common crop insurance policy--crop provisions with a November 30 and/or December 31 contract change date - Coarse grains - Cotton (AUP) - Cotton (ELS) - Sunflowers - Revised/simplified prevented planting language - Revise optional unit provisions - Center pivot irrigation C. Revisions to crop endorsement under the general crop insurance policy - Florida citrus endorsement - Interim rule adds language needed for calculating indemnities under the catastrophic risk protection coverage 2. Policies to be brought under the common crop insurance policy A. Crop provisions with a June 30 contract change date - Nursery and the frost, freeze, and cold damage exclusion option - Sugarcane (Proposed rule comment period ended - regulations to be final rule prior to 5/15 actuarial filing) B. Crop provisions with a November 30 and/or December 31 contract change date - Dry bean - Hybrid corn seed - Hybrid sorghum seed - Rice - Malting barley endorsement These policies are targeted to be published as final rules by the October 1 actuarial filing date. Hybrid seed policies and rice contain simplified prevented planting and clarification regarding optional units for non-irrigated corners of a center pivot irrigation system. 3. New crop pilot programs for the 1996 crop year--policies in common policy format - Canola/rapeseed - Revised policy to allow fall seeded canola and rapeseed coverage - Millet (new pilot policy) - Florida fruit trees (new pilot policy) 4. Other initiatives A. Proposed rule for implementation of the ineligible file tracking system targeted for final rule effective the 1996 crop year. B. Proposed revisions to SSN/EIN regulations--agent/loss adjuster SSN/EIN and husband and wife SBI to be effective for the 1996 crop year. C. Analysis of the peanut and tobacco programs to assess the feasibility of converting to an APH-based yield methodology. If feasible, targeted for the 1997 crop year. 1. Revisions to the common crop insurance policy - basic provisions to include: - Revisions to share insured - May only insure your share - Allow establishment of market price elections after contract change date - States insurable acreage must have been planted/harvested within last 3 years, excluding years of crop rotation or participation in USDA programs - Establish acreage report due date at latest A/R date on multiple crop policy - Allow for insuring contiguous land across non-discernable county line 2. Policies to be brought under the common crop insurance policy A. Crop provisions with a February 28 contract change date - Texas citrus tree B. Crop provisions with an April 15 or April 30 contract change date - Florida citrus - Forage seeding - Pepper - Raisin * - Sugar beet - Fresh market sweet corn - Fresh market dollar plan tomato * (Will be effective for the 1996 crop year) C. Crop provisions with a May 31 or June 30 contract change date - Small grains crop provisions - Forage production - Southern potato D. Crop provisions with an August 31 contract change date - Almond - Peaches - Apples - Pears - Cranberry - Safflower - Grape - Macadamia nut - Macadamia tree Group risk plan of insurance - - Barley - Corn - Cotton - Forage - Grain sorghum - Peanut - Soybean - Wheat E. Crop provisions with an October 31 contract change date (California crops) - Plum - Prune - Stonefruit - Table grape - Walnut G. Crop provisions with a November 30 and/or December 31 contract change date - Peanut - Potato (northern) & Options - Quota tobacco - Guaranteed tobacco - Dry pea - Canning and processing bean - Green pea - Onion - Popcorn - Canning & freezing sweet corn - Canning and processing tomato - Fresh market tomato guaranteed production 1998 Crop Year Policies A. Crop provisions with an August 31 contract change date - AZ-CA citrus ** - Texas citrus ** ** Aug. 31, 1996 for 1998 Crop Year Actuarial Initiatives and Project Plans for Crop Years 1996 and 1997 Crop Year 1996 Initiatives. 1. Restructure of actuarial documents--changes due to re-engineering and crop reform requirements. - New FCI-35 formats (reduced pages by 33-50 percent) - Options that were previously types (and rated separately) to be displayed as add ons - Coverage levels established at 5 percent intervals (capability to go to 1 percent increments in the future if necessary) - Display hail and fire exclusion as a percentage discount vice previous complex formulae - Eliminate the special rating table through use of rate adjustment factors on the FCI-35 supplements and establish a rate on the FCI-2 agreement (makes FCI-2 automation a priority) - Display unit discount factors on the FCI-35 to simplify worksheet calculations - Publish a combined Producer Premium Percentage Tables document (11 pages) to save one page from every county crop program actuarial document - File all actuarial documents (excluding maps) electronically-- previously only FCI- 35's, special provisions, and rules pages were electronic - Standardize/minimize pages of supplements, rules pages, special provisions - Redesign the Actuarial Data Master (ADM) to comply with the re-engineered actuarial documents and provide for electronic distribution 2. Re-engineering and data processing improvements. - Standardize the format and data requirements, and automate the FCI-2 written agreement process - Implement the StatPlan normalized actuarial database to facilitate rating and analyses - Provide an operational public access server, with a 1-800 telephone number and Internet connectivity, to allow industry and CFSA to access StatPlan, bulletins, and other information - Implement the Ineligible Tracking System to reject duplicate policies, debtors, etc. - Provide automated access to ASCS yield and base acres data for companies - Automate the escrow accounting process (now manual): - Eliminates the manual check register - Will fund company escrow daily on validated losses - No monthly reconciliations required (simplification) - Provides faster transfer of funds to companies 3. Data system change requirements - Draft 1996 Manual 13 by end of May 1995. - Options: New data reporting requirement to reflect changing coverage options from crop types to add ons (helped reduce FCI-35's by 33-50 percent) - Map area rate differentials - Name reporting by last, first, middle (delayed from 1995 crop year at industry request) - Display of 31 percent expense reimbursement on summaries of protection by companies 4. Simplification initiatives for the 1996 crop year - Complete all error checks/validations before rejecting a record - Reduce pages of actuarial documents and publish electronically to reduce copy time - Eliminate zero-fill requirement to reduce data transmission times - Provide new DAS validation COBOL software to companies to reduce their data processing costs - Reduce M-13 reporting requirements (for example, address, phone number, etc.) - Reduce hard edit/reject requirements (for example, calculated and ADM-published fields) - Eliminate accounting deduction flags (such as why a deduction was made) - Eliminate types and practices when feasible - Provide actuarial "packing list" with each filing - Establish an automated Manager Bulletin/R&D Info Memo bulletin board system for remote access Crop Year 1997 Initiatives. - Expand and renumber crop codes - Standardize type and practice codes across crops - Combine/eliminate types and practices - Develop state special provisions books to combine like wording to reduce paper - Pursue provisional pricing in the actuarials with later market prices for most crops - Establish capability to publish map area legal descriptions in the actuarials to take the place of or augment the actuarial maps (FCI-33's) to minimize agent look-up time - Issue the Summary of Changes with each filing - Establish NCS rate differentials vice special rates and simplify the NCS process - Pilot and implement rating changes and improvements - Complete re-engineering of all business functions - Automate interfaces with selected CFSA/USDA databases