Insurance firm settles with farmers
Thursday, July 6th 2000, 12:00 am
By: News On 6
DES MOINES, Iowa â€“ An Iowa insurance company announced a $3.7 million settlement Wednesday with thousands of rice farmers, some of whom accused it of reneging on a price agreement.
American Agrisurance Inc. of Council Bluffs earlier agreed to provide an additional $1.65 million for a research and education fund to benefit rice producers, as well as $1.2 million to reimburse the Federal Crop Insurance Corp. More than 60 percent of the farmers were from Arkansas, with the rest scattered throughout the Mississippi Delta in Mississippi, Louisiana and Missouri, company spokesman John Scherle said.
In 1999, American Agrisurance, the third largest crop insurance company in the United States, offered to enroll the farmers in a crop insurance plan known as CRCPlus that guaranteed at least 3 cents per pound on rice. The insurance company was supposed to pay the difference between that amount and the price farmers actually got on the market if it turned out to be lower.
The company said 10,000 to 12,000 farmers signed up before the Feb. 28, 1999, deadline. But on March 1, the company said the overwhelming response forced it to reduce its guaranteed price to 11/2 cents per pound.
Congress has encouraged farmers to get crop insurance as it tries to wean them from subsidy payments under the 1996 Freedom to Farm Act. Paying a higher premium, farmers could get CRCPlus, which offered greater protection against price drops than government-subsidized insurance programs.
Farmers flocked to the coverage because of low prices the previous year.
"The demand outstripped our abilities to handle all of our applicants ... and we did have to react to that," said Kim Gibson, president of American Agrisurance. "So we were not able to provide and satisfy the demand for CRCPlus for rice-producing areas."
The company anticipated about five times its normal amount of business but instead got 10 to 20 times its normal amount, Mr. Scherle said.
Mr. Scherle said all farmers who signed up for the coverage, including any who signed but later withdrew after the offer was reduced, are eligible to take part in the fund, which was established by a court order Monday.
American Agrisurance also announced it has developed a system to monitor applications, provide prompt confirmation of coverage and close sales when capacity is approached.
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