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HEARING TO REVIEW THE STATE OF THE CROP INSURANCE INDUSTRY HEARING BEFORE THE SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT OF THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION JULY 22, 2010 Serial No. 111–58 ( Printed for the use of the Committee on Agriculture agriculture.house.gov U.S. GOVERNMENT PRINTING OFFICE 58–021 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 08:29 Sep 23, 2010 Jkt 041481 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 I:\DOCS\111-58\58021.TXT AGR1 PsN: BRIAN COMMITTEE ON AGRICULTURE COLLIN C. PETERSON, Minnesota, Chairman TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking Vice Chairman Minority Member MIKE MCINTYRE, North Carolina BOB GOODLATTE, Virginia LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas JOE BACA, California TIMOTHY V. JOHNSON, Illinois DENNIS A. CARDOZA, California SAM GRAVES, Missouri DAVID SCOTT, Georgia MIKE ROGERS, Alabama JIM MARSHALL, Georgia STEVE KING, Iowa STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas Dakota K. MICHAEL CONAWAY, Texas HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska JIM COSTA, California JEAN SCHMIDT, Ohio BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska TIMOTHY J. WALZ, Minnesota DAVID P. ROE, Tennessee STEVE KAGEN, Wisconsin BLAINE LUETKEMEYER, Missouri KURT SCHRADER, Oregon GLENN THOMPSON, Pennsylvania DEBORAH L. HALVORSON, Illinois BILL CASSIDY, Louisiana KATHLEEN A. DAHLKEMPER, CYNTHIA M. LUMMIS, Wyoming Pennsylvania THOMAS J. ROONEY, Florida BOBBY BRIGHT, Alabama BETSY MARKEY, Colorado FRANK KRATOVIL, JR., Maryland MARK H. SCHAUER, Michigan LARRY KISSELL, North Carolina JOHN A. BOCCIERI, Ohio SCOTT MURPHY, New York WILLIAM L. OWENS, New York EARL POMEROY, North Dakota TRAVIS W. CHILDERS, Mississippi WALT MINNICK, Idaho PROFESSIONAL STAFF ROBERT L. LAREW, Chief of Staff ANDREW W. BAKER, Chief Counsel APRIL SLAYTON, Communications Director NICOLE SCOTT, Minority Staff Director SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT LEONARD L. BOSWELL, Iowa, Chairman JIM MARSHALL, Georgia JERRY MORAN, Kansas, Ranking Minority BRAD ELLSWORTH, Indiana Member TIMOTHY J. WALZ, Minnesota TIMOTHY V. JOHNSON, Illinois KURT SCHRADER, Oregon SAM GRAVES, Missouri STEPHANIE HERSETH SANDLIN, South STEVE KING, Iowa Dakota K. MICHAEL CONAWAY, Texas BETSY MARKEY, Colorado BLAINE LUETKEMEYER, Missouri LARRY KISSELL, North Carolina THOMAS J. ROONEY, Florida DEBORAH L. HALVORSON, Illinois EARL POMEROY, North Dakota TRAVIS W. CHILDERS, Mississippi ALETA BOTTS, Subcommittee Staff Director (II) VerDate 0ct 09 2002 08:29 Sep 23, 2010 Jkt 041481 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 I:\DOCS\111-58\58021.TXT AGR1 PsN: BRIAN C O N T E N T S Page Boswell, Hon. Leonard L., a Representative in Congress from Iowa, opening statement .............................................................................................................. 1 Prepared statement .......................................................................................... 3 Graves, Hon. Sam, a Representative in Congress from Missouri, opening statement .............................................................................................................. 3 Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, opening statement .............................................................................................................. 4 Moran, Hon. Jerry, a Representative in Congress from Kansas, prepared statement .............................................................................................................. 6 Peterson, Hon. Collin C., a Representative in Congress from Minnesota, pre- pared statement ................................................................................................... 5 WITNESSES Murphy, William J. ‘‘Bill’’, Administrator, Risk Management Agency, U.S. Department of Agriculture, Washington, D.C. .................................................. 7 Prepared statement .......................................................................................... 8 Rutledge, Steven C., President, CEO, and Chairman of the Board, Farmers Mutual Hail Insurance Company of Iowa, West Des Moines, IA; on behalf of Crop Insurance Research Bureau, Inc. .......................................................... 31 Prepared statement .......................................................................................... 33 Parkerson, Robert W., President, National Crop Insurance Services, Inc., Overland Park, KS ............................................................................................... 37 Prepared statement .......................................................................................... 38 Frerichs, Stephen, President, AgVantage, LLC;; Legislative Consultant, Rain and Hail, L.L.C., Alexandria, VA; on behalf of American Association of Crop Insurers ....................................................................................................... 42 Prepared statement .......................................................................................... 44 Deal, James D., Chairman of the Board, NAU Country Insurance Company, Andover, MN ........................................................................................................ 48 Prepared statement .......................................................................................... 51 Dalton, John F., President, Midwest Insurance Associates LLC and Agri- Land Insurance Agency, Council Bluffs, IA; on behalf of Independent Insur- ance Agents & Brokers of America ..................................................................... 63 Prepared statement .......................................................................................... 65 Fowler, Kathy, President, National Association of Crop Insurance Agents, Memphis, TX ........................................................................................................ 68 Prepared statement .......................................................................................... 70 Roach, Jordan A., Vice Chairman, Crop Insurance Professionals Association LLC, Fresno, CA .................................................................................................. 72 Prepared statement .......................................................................................... 74 SUBMITTED QUESTIONS Submitted questions ................................................................................................ 97 (III) VerDate 0ct 09 2002 08:29 Sep 23, 2010 Jkt 041481 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 I:\DOCS\111-58\58021.TXT AGR1 PsN: BRIAN VerDate 0ct 09 2002 08:29 Sep 23, 2010 Jkt 041481 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 I:\DOCS\111-58\58021.TXT AGR1 PsN: BRIAN HEARING TO REVIEW THE STATE OF THE CROP INSURANCE INDUSTRY THURSDAY, JULY 22, 2010 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT, COMMITTEE ON AGRICULTURE, Washington, D.C. The Subcommittee met, pursuant to call, at 9:30 a.m., in Room 1300, Longworth House Office Building, Hon. Leonard L. Boswell [Chairman of the Subcommittee] presiding. Members present: Representatives Boswell, Walz, Schrader, Herseth Sandlin, Kissell, Pomeroy, Peterson (ex officio), Costa, Moran, Graves, Conaway, and Lucas (ex officio). Staff present: Aleta Botts, Liz Friedlander, Craig Jagger, John Konya, Clark Ogilvie, James Ryder, April Slayton, Rebekah Solem, Tamara Hinton, Kevin Kramp, Nicole Scott, Pelham Straughn, Pete Thomson, Jamie Mitchell, and Sangina Wright. OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE IN CONGRESS FROM IOWA The CHAIRMAN. I would like to call the meeting to order. Welcome, everybody. I say in the beginning that my friend, Ranking Member, Jerry has had a death in the family and may show up late. I am not sure just yet. I also have my next door neighbor, Mr. Sam Graves, here. A state line divides us, I guess, but we have known each other a long time. We both like to talk about airplanes. In fact, we have already done it this morning, haven’t we Sam? Mr. GRAVES. Yes, we have. The CHAIRMAN. Anyway we will come to order, and I would like to thank you for being here as we review the state of the crop in- surance industry. I would like to thank the witnesses. Of course, when we have somebody from the home state here, we are always kind of pleased about that. We all look forward to these opportunities; and I want to give a welcome to the two Iowans who will be on the second panel, Mr. Rutledge and Mr. Dalton, for making the trip. Being from Iowa, the state with over 92,000 farms and over 30 million acres in production, we understand the challenges that farmers in that agriculture business face. You probably heard this too many times, but it has been quite an impact on me, so I will keep telling it. When I returned to Iowa after spending a period of time in the Army—I was drafted and (1) VerDate 0ct 09 2002 08:29 Sep 23, 2010 Jkt 041481 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\DOCS\111-58\58021.TXT AGR1 PsN: BRIAN 2 thought I’d be gone a couple of years. I was gone a little over 20 years—I came back to do something I wanted to do very badly and that was to farm. My, my, how it had changed, big time. I already knew—I always knew that, at least the size of the oper- ation that I was