Johnson, James B.

English

Research Papers in Economics

   B R I E F I N G
       Briefing No. 13 (Revised)                     October 2003
                                                                                        A Request for Actuarial Change
                                                            
                                                                James B. Johnson
Agricultural Marketing Policy Center
Linfield Hall
P.O. Box 172920
Montana State University
Bozeman, MT 59717-2920
Tel: (406) 994-3511
Fax: (406) 994-4838
email: ampc@montana.edu
website: www.ampc.montana.edu
Objective
Analysis
for Informed
Decision Making
Introduction:  
Farm managers evaluating whether or not
to expand their existing crop rotations
with the introduction of alternative crops
are usually concerned with managing
additional production risks.
Farm managers, through their crop
insurance agents, may readily determine
whether there are offerings of multiple
peril crop insurance for the alternative
crops they are considering.  Crop
insurance agents can determine whether or
not there are Risk Management Agency
actuarial tables for the subject crops
available in the counties where production
is being considered.
If Risk Management Agency actuarial
tables are available for the subject crops in
the county,  then farm managers may work
with their crop insurance agents to obtain
the production risk coverage they desire
through  multiple peril crop insurance
offerings.  If their choices are to not
purchase multiple peril crop insurance
offerings,  they have chosen to self-insure
or they have chosen forms of private
sector singular peril coverage available for
particular crops.  With the choice not to
purchase multiple peril crop insurance
offerings they have no other mitigation
avenues available in the public sector to
cover production losses.    
 
If Risk Management Agency actuarial
tables are unavailable for the alternative
crops under consideration, farm managers
have two primary avenues to pursue. 
They may  rely on the Farm Service
Agency’s Noninsured Crop Disaster
Program (the subject of a separate
briefing).  Or they may file a Request for
Actuarial Change with their crop
insurance agents.
The Process of Filing a Request for
Actuarial Change: 
Before this process is started, what is the
expected outcome?  A successful Request
for Actuarial Change results in a Written
Agreement.  This agreement, if accepted by
the farm manager, is an individualized
agreement to insure the subject crop in the
specified county for that crop year.
The Request for Actuarial Change process
is initiated with the farm manager
conferring with the local crop insurance
agent.  The farm manager and the crop
insurance agent then complete the
appropriate form, FCI-5, Request for
Actuarial Change.
The form requires the following
information:
! The producer’s name and address,
social security number, and etc.
! The crop, type, and practice
! The location of the proposed
production
! An actual production history form
with crop production history for the
crop requested.  There must be actual
production history for at least the
three most recent years that the crop
was seeded
! Farm Service Agency aerial
photography of the proposed
production location
Contact:
James B. Johnson
(406) 994-5606
jamesjohnson@montana.edu! Some evidence of the adaptability
of the crop.
There are details relative to the
information that need to be fully
understood by the farm manager and the
cooperating crop insurance agent.  What
is meant by crop, type, and practice? 
Perhaps this is best understood by
example:
! Crop: wheat 
! Type:  winter       
! Practice: summer fallow
Crop, type, and practice information may
be accessed by crop insurance agents in
pertinent county actuarials.
The location of the proposed production
requires a legal description supported by
Farm Service Agency aerial photography
of the proposed production location.
Crop production history for the subject
crop needs to be specified.  The crop
production history must include acres,
yields, and production for the most recent
three years the crop was seeded/planted.
Evidence of the adaptability of the
subject crop needs to be provided. 
Production of the subject crop in the area
or like areas should be cited. 
Once the Request for Actuarial Change
form is completed, it is forwarded by the
farm manager’s crop insurance agent to
the private sector insurance company the
agent represents for research and review. 
Subject to the insurance company’s
review for completeness and accuracy of
the information submitted, the request is
forwarded to the regional office of the
Risk Management Agency, USDA.  
RMA  Evaluation of a Request for
Actuarial Change:
Regional Risk Management Agency
specialists will first determine the
adaptability of the subject crop.  If there
is a determination of adaptability, then
processing of the request will proceed.   
A positive adaptability determination is
not assured.  The Risk Management
Agency determines whether or not crop
policies are being written for the subject
crop somewhere in the United States.  If
it is determined that no crop policy exists
for the subject crop, insurance coverage
cannot be made available to the
requesting producer.  In other words,
there has to be a regular multiple peril
crop insurance policy available
somewhere in the United States for a
Request for Actuarial Change to be
successful.
With a positive determination of
adaptability of the subject crop covered in
the request, the Risk Management
Agency specifies a reference county.  For
example, suppose a farm manager in
County A requests coverage for exotic
peas.  An actuarial table for exotic peas
exists in 10 other counties in the state,
including County B, a county with
similar production conditions to County
A.  County B then would be  designated
the reference county.
With the adaptability of the subject crop
affirmed and the reference county
designated, the Risk Management
Agency then thoroughly reviews the farm
manager’s production history for the
subject crop.  The Risk Management
Agency prepares a Written Agreement
with an insurance rate and coverage level
specified.
The Written Agreement:
The farm manager is provided the
Written Agreement with an insurable
price for the subject crop noted.  The
farm manager may denote a price election
for the subject crop from 55 to 100
percent of the insurable price.  
The farm manager is also notified of the
yield for the subject crop, as specified by
the Risk Management Agency.
Once coverage is fully determined and
the farm manager has specified the price
and yield elections, the per acre premium
rate is determined according to the RMA
premium method.  The farm manager
signs the Written Agreement to signify
acceptance of the coverage at the
premium rate determined.
The programs of the MSU Extension Service are available to all people regardless of race, color, national origin, gender, religion, age,
disability, political beliefs, sexual orientation, and marital or family status.  Issued in furtherance of cooperative extension work in
agriculture and home economics, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, LeRoy Luft,
Vice Provost and Director, Extension Service, Montana State University, Bozeman, MT 59717.

A Request for Actuarial Change

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