INSURANCE EXPERIENCE-1971 The 1971 insurance coverage of $935 million provided to farmers is the greatest amount of protection of farm crops since the Corporation's inception in 1939. Coupled with the projected favorable loss ratio for the second straight year, 0.63 as commented on above, it is expected the premium excess over indemnities will be as much as $18 million. Although there have been years with more favorable loss ratios, the great amount of insurance in force for crop year 1971 should make this the greatest dollar excess of premiums over indemnities since the program began in 1939. Crop programs which are expected to provide the greatest excess are wheat $7.7 million, corn$7.3 million, and tobacco-$3.0 million. These three crops represent 69 percent of the record 1971 insurance protection. Only four crop programs are expected to reflect unfavorable loss ratios. Of these, the peanut program serves to illustrate the risky nature of the farming enterprise and the service the Corporation continues to render to insureds when unexpected losses are sustained. Although the program has been in operation since 1962 and reflects a favorable cumulative loss ratio, Hurricane Ginger this year triggered heavy losses from excess moisture in Virginia and North Carolina. The expected loss ratio is 2.22. Even so, the cumulative ratio is expected to remain favorable (0.79) as a result of good experience over the 10-year life of the program, only one other year having a loss ratio in excess of 1. With the favorable experience for 1971, the Corporation's current overall loss ratio for 1948-71 for all crops is 0.95, meaning that 95 cents of each premium dollar has been returned to insured farmers that incurred losses over the 24 years since FCIC operations were put on a limited basis in 1948. We refer you to the chart. (The information follows:) PROGRAM .50 Сгор 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1965 1969 1970 1971 58 1.431 .52 1.06] .85 1.25 1.42 1.26 1.09 60 .16 .68) .23 1.09 .38 .17 16 1.26 2.38 Flax 51 621 .42 .49 .79/ Bean .29 64 1.843.14 .55 Citrus .04 .46. .56 .87 1.45 .23 1.52 .54 2.46 .45 1.64 .47 1.27 .65 .74 65 .36 .44 .56 .54 .67 39 .35 '48-'71 .95 .62 .31 .53 59 .38 .57 1.24 .54 1.141.01 .74 .46 .42 .54 1.05 .58 7411 .58 .58 1.03 64 311 .661 Potato Apple Tomato Safflower Sugar Beet Tung Nu: Puerto Rico All Programs 68 .251 .48 771441 .071 .461 .46 .07 .07 .06 .03.30 .87 2.69 .76 2.771 .72 981 591 .35 .92 .37 1.91 .91 3.33 .241.65 1.05) 1.21 4.84 .211.66 4.33 ⭑ 2.61 *No program. 1/ Based on Estimate of 1971 Insurance Experience as of 1/27/72. REORGANIZATION Mr. ASLAKSON. The reorganization referred to at last year's hearings has been completed. The field structure of the agency was modified to provide improved service to farmers, as well as to separate and isolate the claims and actuarial functions from other agency activities. These objectives were accomplished through eliminating the Corporation's area and State offices at 28 locations and establishing contract service and sales centers at 14 locations. In accomplishing the principal goals of the reorganization, the number of full-time permanent positions was decreased, and the number of field service positions was expanded. This provides increased direct service to farmers. In conjunction with the President's Federal assistance review program, the Corporation's Actuarial Division is now being relocated from Washington, D.C., to Kansas City, Mo. This will enable the Corporation to increase productivity through greater utilization of existing ADP facilities and provide more equitable rates and coverages to policyholders. This concudes my statement. We will be glad to answer any questions or furnish any additional information you may desire. Mr. WHITTEN. I have read ahead of you and looked through the justifications. I have some questions that I think might be well in the record. LIMITATIONS ON SALES We have for several years discussed the problem of quotas. What crops are under quotas, how is this decided, and how are farmers notified? Mr. ASLAKSON. No sales quota limitations are currently in effect for 1972. When risk conditions are considered to be substantially above normal, we do try to restrict the increase in insurance liability for the crop to a reasonable level. For example, in 1971, the fear of corn blight throughout most of the major corn producing areas of the Midwest was very high. We limited the increase in insurance liability to approximately 150 percent of the insurance in force in the county for the prior year. Farmers are notified of the limitations through local newspapers, radio, and other information media. DECLINE IN COTTON PREMIUM Mr. WHITTEN. Explain the decline in premiums for cotton mentioned on page 142. Mr. ASLAKSON. In 1970, after 4 consecutive years of cotton indemnities exceeding premiums by a total of $31 million, we limited our sales effort to maintain about the level of liability that was in force the prior year. In addition, the Corporation's sales force increased its direct sales efforts to expand participation by producers for other commodities offered in cotton areas. These factors, combined with producer cancellations, resulted in a decline in cotton premiums. EFFECT OF REORGANIZATION ON FARMERS Mr. WHITTEN. Explain the effect of your reorganization on the insured farmer. Mr. ASLAKSON. I believe insured farmers have benefited from the reorganization. They can now receive additional improved service when needed because the reorganization permitted redirecting our resources to increased direct contact with the insureds and also to im proving the quality of that work force by additional training and job specialization. PERSONNEL REDUCTIONS Mr. WHITTEN. Document, for the record, the effect of personnel reductions made in 1972. Mr. ASLAKSON. The personnel reduction of approximately 53 fulltime permanent employees has not adversely affected the Corporation's level of business. All but approximately 6 man-years have been redirected into nonpermanent positions at the field level where direct contact is made with insureds. In essence it represents reduction of some supervisory level positions in favor of field level positions where the business of the Corporation is most effectively performed. STATUS OF REORGANIZATION Mr. WHITTEN. Mr. Andrews? Mr. ANDREWS. You mentioned the reorganization of your agency and the fact that it is moving along pretty well. What, if any, further changes are planned? Mr. ÁSLAKSON. Only the moving of the actuarial function from Washington to Kansas City, Mo. Mr. ANDREWs. But no other besides that? Mr. ASLAKSON. NO. Mr. ANDREWS. That will essentially complete the plans that you have for the streamlining of the agency? Mr. ASLAKSON. Yes, sir. NUMBER OF CONTRACTS Mr. ANDREWS. How many policyholders do you have now? Mr. ANDREWS. Would you provide it for the record, and maybe compare it with the last 4 years so we can see? Mr. NAYLOR. Over the last 5 or 6 years, it has held somewhere in the range of 260,000 to 290,000. (The information referred to follows:) Following are the contracts in force, by years, for the period 1967 to 1971: Mr. ANDREWS. That's all, Mr. Chairman. Mr. WHITTEN. Mr. Scherle. Mr. SCHERLE. I have no questions, Mr. Chairman. Mr. WHITTEN. Thank you. I think that time is proving that we need crop insurance. I know you are working hard trying to operate a program actuarially sound. Knowing that we have had some bad years it is good to know that we had a good year last year. Even though you had one good year, you still need to stick to your guns and keep the premiums at a proper level. I wish to thank you for the record. (Whereupon, at 3: 15 p.m., the subcommittee recessed, to reconvene 1 p.m., Tuesday, March 14, 1972.) |