RMA’s Conflict of Interest Provisions

What duties your crop insurance agent can and cannot perform in the loss claim/adjustment process

By Bill Craig

A number of crop insurance agents became quite upset with new conflict-of-interest provisions put in place by the USDA-RMA beginning with the 2005 Standard Reinsurance Agreement (SRA). It changed the way agents could conduct business with their customers following a reported loss claim.  

USDA-RMA put the conflict-of-interest provision in place to avoid the potential for or appearance of agents inappropriately influencing the loss claim process – for example, influencing loss adjusters who are working their policyholder’s claim.

The provision prohibited an agent from discussing a loss claim with his customer.  One agent comments that “it doesn’t make sense that you advise a customer on crop insurance products, but after he buys the insurance then reports a claim you can’t talk with him about it.” Says another agent: “When a customer is experiencing a production loss and has questions, it’s important to meet with them and answer those questions.  Keeping the customer updated on the progress of the claim is an important service provided by agents.”

One of the consequences of the new provision was slower response time for claims adjustment. For instance, growers often leave their Farm Service Agency field maps with their crop insurance agents.  Claims adjusters could obtain the maps from the agent, saving adjusters time as they verify production and work the loss claim.  The 2005 SRA prohibited the adjuster from contacting the agent, so the adjuster had to get the field maps directly from the policyholder or from the county FSA office during a very busy time of the year.

In response to producer, sales agent, and insurance company complaints, RMA issued Managers Bulletin Number: MGR-05-019 titled Guidance Regarding Conflict of Interest During Loss Adjustment. The bulletin issued on October 31, 2005, provides clarification and guidance to insurance providers on allowable and prohibited interaction among sales agents, policyholders, and loss adjusters during the loss adjustment process.  It can be found online at www.rma.usda.gov/news/managers/2005/PDF/mgr-05-019.pdf

What duties can your crop insurance agent perform while your claim is being processed?  According to RMA, activities your agent may perform include the following:

• Receive a notice of loss from the policyholder and transfer it to the company.
• Provide a copy of the Approved Insurance Providers (AIP) official file folder to the loss adjuster.
• Provide loss adjuster with any information provided from the policyholder related to the loss.  If the policyholder gives certain information to the agent that normally is obtained by the adjuster (settlement sheets, weight slips, maps, etc.) the agent may provide such information to the loss adjuster. However, the loss adjuster is directly responsible for the verification and validation of the information from the third party, just the same as if provided by the insured.
• Facilitate the loss adjuster’s gathering of information directly from other parties. For example, the agent may call the grain elevator to confirm the loss adjuster’s identification and authority to collect needed information.
• Assist the loss adjuster to locate the policyholder or vice versa.

An agent may not perform the following activities since they present opportunities for the agent to inappropriately exert influence:

• Ride with the loss adjuster to the field or be present with the loss adjuster during the loss inspection and related processes.
• Accompany the loss adjuster or company reviewer in their independent verification and validation of claim information from third parties.
• Offer the use of or allow a loss adjuster to use the agent’s or agency’s office, computer or other similar resources to prepare the claim and related documentation. However, the adjuster may use the administrative services such as copying and faxing services as necessary to facilitate the loss inspection.

Prohibited agent contact does not include:

• Social interactions.
• Checking on the status of a claim, claim payment or facilitating any follow up for appointments or other necessary meetings between the producer and the adjuster.
• Normal course of business contact on other policies, policy provisions and crop insurance matters not related to a specific open claim.
• Interaction on a claim after the loss adjuster has filed the appropriate claim documentation with the AIP (the agent shall not engage the loss adjuster directly on a claim dispute).

Insurance agents can consult with their customer following a reported loss claim as long as the consultation does not include any opinion, influence or coercion as to the facts of a claim on policies written by the agent or the determinations of the loss adjuster on that claim. If the agent suspects that a claim has been adjusted incorrectly or contains a factual error, he may contact the company’s field supervisor or claims manager for review and assistance, but he must not contact the adjuster.  The agent may assist the policyholder in understanding the loss determination and his or her options for an appeal with the AIP.

Hopefully, the 2006 growing season will be a good one so producers, crop insurance agents and claims adjusters will not have production losses to worry about. However, if you do suffer a loss this year, your agent will be able to discuss your claim with you and provide the service you expect, within the confines of the SRA provisions.    

Bill Craig is a regional extension educator of Ag Business Management, U of M Extension Regional Center, Crookston. Ph. 888-241-0781, email: craig030@umn.edu.