BULLETIN NO.: MGR-98-030 TO: All Reinsured Companies All Risk Management Field Offices FROM: Kenneth D. Ackerman /s/ Ken Ackerman 10-9-98 Administrator SUBJECT: Simplified Claims Processing Pilot Standards BACKGROUND: The Risk Management Agency (RMA) has reviewed the use of the Simplified Claims Processing (SCP) Pilot Program implemented for the 1996 and succeeding crop years. The review indicated that some of the rigidity and restrictions of the standards may have limited its use and implementation by reinsured companies. Therefore, little credible experience has been gained to date for testing this initiative. ACTION: To make SCP more acceptable for implementation, RMA has modified the SCP Pilot Program effective for the 1999 and 2000 crop years as follows: 1 The crops and criteria for claims to qualify for SCP are as follows: A Eligible crops are: almonds, barley, canning and processing sweet corn, canola, corn, cotton, dry beans, dry peas, flax, grain sorghum, green peas, oats, peanuts, popcorn, rice, rye, soybeans, sugar beets, sunflowers, tobacco, wheat, and any crops covered under the Crop Revenue Coverage (CRC), Revenue Assurance (RA), and Income Protection (IP) plans of insurance. B Eligible crop policies may be designated in any risk sharing fund of the Standard Reinsurance Agreement. C Crop policies with basic, optional, whole farm, or enterprise units are eligible, provided all other SCP criteria are met. D SCP can be used on a unit containing both planted and prevented planted acreage provided a prevented planting claim has been finalized prior to submission of the SCP claim on the planted portion of the unit. E The gross indemnity (insured's share prior to any dollar amount due the insurance provider) must not be greater than $5,000 for any optional unit. The gross indemnity must not be greater than $10,000 for any basic, whole farm, or enterprise crop unit. When calculating the gross indemnity, replanting payments and prevented planting payments may be excluded. F Field level spot checks must be completed in accordance with Manual 14. If a SCP claim has been submitted for the current crop year and an indemnity was paid using SCP procedures during either of the previous 2 crop years, a spot check must be completed for the current crop year. G All planted acreage in the unit must be harvested. EXCEPTION: Claims with an on-site preliminary inspection where acreage was determined, appraised and a release made for the unit may be finalized under SCP, provided none of the appraised acres have been harvested. (1) Third-party, written verification must be available and submitted by the insured that accounts for all production from all indemnified units. (Settlement sheets or summary sheets are acceptable; however, individual load weight tickets are not acceptable). (2) No portion of the crop may be left in the field except appraisals made on preliminary inspections as outlined in the "Exception" in G above. (3) Copies of either Farm Service Agency (FSA) acreage measurements or third-party measurements as allowed by the 1998 LAM, paragraph 95, must also be provided by the insured, if available. Otherwise, copies of aerial photos identifying each field, crop planted in each field, and number of acres in each field must be provided. In all cases, the applicable indemnified unit acreage must be identified. If the insured does not have acceptable acreage measurements available, but acceptable previous measurements (as defined in paragraph 95 of the LAM) are available to the company, the company must use these measurements. H Any crops listed in Item A that have claims involving quality adjustment may qualify for SCP when the preestablished discount factors (to determine quality adjustment factors) for the level and type of damage are contained in the actuarial documents. Factors that affect quality must be determined by a licensed grain grader under the authority of the United States Grains Standards Act or the United States Warehouse Act. Cotton claims with quality adjustment may also qualify for SCP as cotton quality adjustment factors are obtained from the Daily Spot Cotton Quotations published by the Agricultural Marketing Service. I Claims involving any of the following conditions are not eligible. (1) Farm-stored production, even if weighed and returned to farm. (2) Claims with only prevented planting, and prevented planting claims that have not been finalized prior to the submission of the SCP claim for the planted portion of the unit. (3) Corrected claims. (4) Delayed claims. (5) Claims requiring a revised acreage report unless it is a downward revision in liability, that results from third-party verified documentation agreed to, and supplied by the insured. (6) Nonstandard Classification System (NCS) insureds. (Not applicable for 1999 and succeeding years). (7) Reinsured company employees, loss adjusters, agents, or FCIC/RMA employees or any spouse or family member residing in the same household as any such person. (8) Zero production is reported. (9) Production fed to livestock. (10) Crops covered under a pilot program that has been in effect for 2 or fewer crop years. (11) Claims involving quality adjustment if there are no preestablished discount factors (to determine quality adjustment factors) contained in the actuarial documents for the level or type of damage. (e.g., mycotoxin). J Reinsured companies must not allow their agents to complete or become involved in SCP claims. K All reinsured companies must use appropriate discretion in their use of SCP as they would in administrating any claims procedure. L If FCIC determines that a reinsured company or managing general agent does not have a satisfactory performance record as defined in the Standard Reinsurance Agreement, use of this procedure by such reinsured company or managing general agent shall be suspended until such time that a satisfactory performance record has been restored. 2 Reinsured companies must report as follows: A SCP claims data for the Data Acceptance System (DAS) must be processed in accordance with Manual 13 requirements. The reinsured company is responsible for ensuring that the SCP is administered in a way that the information collected and submitted through DAS is accurate. B All SCP claims must be completed on a form that has been approved by RMA for the collection of loss information. C Use of SCP for a policyholder is not permitted if misrepresentation of any material fact is suspected. 3 RMA will conduct on-site evaluations and reviews of the SCP Pilot Program and recommend improvements, as necessary. 4 Reinsured company and producer participation in the SCP Pilot Program is voluntary. 5 This bulletin replaces and obsoletes Manager's Bulletins MGR-96-005 and MGR-96-005.1. DISPOSAL: THIS BULLETIN WILL REMAIN IN EFFECT UNTIL MARCH 1, 2001.