The 1957 Crop Year Premiums and Indemnities are based on December 27, 1957 estimates. Prepared January 3, 1958

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1957

BARLEY EXPERIENCE

The barley experience is shown on the left-hand side of chart 6.

This program has been in operation for 2 years. Premiums amounted to $292,000 and indemnities totaled $107,000, resulting in a loss ratio of 0.37. The program shows a surplus for each of the 2 years it has been in operation, and will be expanded as rapidly as the necessary preliminary data can be accumulated and evaluated.

SOYBEAN EXPERIENCE

The soybean experience is shown next on chart 6.

This program has been in operation for 3 crop years. Premiums amounted to $123,000 and indemnities totaled $101,000, resulting in a loss rate of 0.82. The program shows a surplus for each of the 3 years it has been in operation. This favorable experience is one of the major reasons for the heavy expansion of insurance coverage on this crop planned for the next few years.

CITRUS EXPERIENCE

The experience for citrus is also shown on chart 6.

This program has been in operation since 1951. For the 7-year period premiums totaled $601,000 and indemnities are shown on this chart as $388,000. However, later information received from the field indicates that because of freeze during January and February additional losses have been incurred. It is now estimated that the experience for the 7-year period will show a deficit. Indemnities for the 7-year period are estimated to be $778,000 and premiums $601,000.

PEACH EXPERIENCE

The experience for peaches is also shown on chart 6.

This program was initiated on the 1957 crop in Spartanburg County, S. C. Premiums amounted to $37,000 and indemnities totaled $22,000, resulting in a loss ratio of 0.59.

CONCLUSION

Mr. McLAIN. That is all I have to say in my formal statement, Senator. We have our people here, and if you are interested in raising any questions about the charts or anything else, we will be glad to answer the questions for you. We are glad that the program was in the black this last year. And, of course, if we have anywhere near normal weather, I think we can keep it that way.

ADMINISTRATIVE EXPENSES

Senator RUSSELL. Did you transfer $2 million last year from your premium income for administration?

Mr. MCCARTNEY. We have $2 million set up to do that. Whether we use it all is a question. We try not to use it. Any that we don't spend just saves our capital by that amount.

Senator RUSSELL. What was your experience last year?

Mr. EVANS. For the 1957 fiscal year we had authority to pay administrative expenses from premium income not in excess of $2 million. We completed the 1957 fiscal year by paying $45,000 from premium income.

Senator RUSSELL. I certainly want to congratulate you on that. That is about the most prudent operation I have seen in any department of Government that had that authority. I hope next year I can make a long speech congratulating you.

You seem to review each of the commodities in this explanatory

statement.

Mr. McLAIN. That is right. They are all self-explanatory. They pretty well explain themselves.

CONTINUOUS INSURANCE POLICY

Senator RUSSELL. Are you still writing 1-year policies generally? Mr. MCCARTNEY. We are writing a continuous policy. The insured has to tell us if he wants it canceled. So, it is actually continuous unless he tells us he wants it canceled.

Senator RUSSELL. What has been your experience in those areas where the winter weather, moisture, hail, and insects sometimes cause loss and damage to yields?

Where you have poor prospects, do you have an unusually large number of farmers coming in and wanting to get insurance policies?

Mr. McCARTNEY. That has been our experience in the past and that is one of the things we are trying to remedy by limiting the amount of increase that we will take in any one county. So, when we get these people rushing in to buy insurance, we stop sales. When they want to buy it, we don't want to sell it to them, in other words.

Senator RUSSELL. It seems to me that you would have to have some means to protect yourself. Because on certain commodities you cannot tell with certainty; but a farmer knows pretty well whether the risk is very great or very small.

Mr. MCCARTNEY. We want to take care of the fellow who has carried our insurance year after year. We do not want these "Johnny Come Lately's" coming in, collecting a loss, and then dropping out.

CITRUS AND PEACH RATES

Senator RUSSELL. How does your premium on citrus and peaches compare with that that you charge on the staple commodities like cotton or wheat?

Are they higher or lower?

Mr. COLBY. The rates on citrus run about 8 percent-7 or 8 percentfor Florida. The other crops would vary somewhat. Wheat, for example, would run a little higher. Wheat will run around 10 or 11 percent.

Our peach rate would run somewhat higher than the citrus rate. And we have a deductible in the peach that is much higher than we do in the citrus. I would imagine the peach would run around 15 to 20 percent.

Senator RUSSELL. You mean the premiums would be 20 percent of the amount of the policy?

Mr. COLBY. The amount of insurance he purchases: yes, sir.

Senator RUSSELL. Pretty expensive insurance; isn't it?

Mr. COLBY. Yes, sir. It is quite risky, Senator. There is one difference, Senator. On peaches and citrus we are insuring against freeze and hail and windstorm-the three risks there. They are named peril policies.

Senator RUSSELL. What is that again?

Mr. COLBY. In the case of freeze, hail, hurricane, and windstorm. Senator RUSSELL. How about insects?

Mr. COLBY. We have not made any attempt to insure against insect damage, partly because it is possible to control it. We have talked to peach producers and they have indicated that with good agricultural practices, they would be able to control insects.

PERCENTAGE OF CROPS INSURED

Senator RUSSELL. What percentage of estimated crops do you insure? Do you have the percentage of the citrus?

Mr. NIKKEL. About 10 percent.

Mr. COLBY. Ten percent, I imagine, of the eligible citrus.

Senator RUSSELL. Oh, I am talking about if I am planning to sell $25,000 worth of peaches, can I get $25,000 worth of insurance?

Mr. COLBY. On citrus we offer in Florida a coverage of $150, $200, and $250 per acre. He can purchase any amount he wants.

In the case of peaches, I believe it is $100 per acre, and I think we go to $300 per acre. It goes up at $50 intervals on peaches. We have a top coverage of $300 per acre to some of the better growers. We have offered as much as $300 per acre.

Senator RUSSELL. If they have a real good year, they sell more than that per acre; don't they?

Mr. COLBY. Yes, sir. You see, under the act, Senator, we are limited to cost of production. That is about the maximum we go to, considering the production cost.

HISTORICAL PRODUCTION RECORDS

Senator RUSSELL. You cut the policy for each producer according to his historical record?

Mr. COLBY. That works a little different than the old insurance that you are more familiar with, Senator. We determine the percentage of damage. Let's take, for example, freeze damage. In the case of citrus we take the fruit left on the trees and it is estimated. Then we determine the percent that is destroyed by freeze. Say, 20 percent is destroyed by freeze; we would pay 20 percent of whatever coverage the man purchased. In other words, if he had purchased $150 worth, we pay 20 percent of that.

Senator RUSSELL. But he has a ceiling on the amount he can purchase?

Mr. COLBY. Yes. I believe in citrus the ceiling is $250 per acre, and on peaches, $300 per acre.

Senator RUSSELL. Is that $250 ceiling available to all of the citrus. producers without regard to their historical production?

Mr. COLBY. In citrus, Senator, we limit that coverage to certain producers. Of course, the amount of production is not so important as it is under cotton.

Senator RUSSELL. Well, it would be, because you have trees at all stages of development. Trees at a certain age would produce twice as much as those at another age.

Mr. COLBY. That is right, Senator. In order not to insure those, we have eliminated those that produce less than 100 hundred boxes per

acre.

Senator RUSSELL. And you have some similar ratio with respect to peaches?

Mr. COLBY. We have a similar deal with respect to peaches; that is correct. We will not insure, I believe, in the case of peaches, trees that have not reached a fourth year of growth; they are not insurable. Then there are certain peach orchards, as you well know, in Georgia,