05 SRA Appendix IV

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APPENDIX IV

I. DEFINITIONS
The definitions in the Agreement apply to this Appendix unless otherwise indicated herein.
Experienced agent means a person, licensed by the State in which the person does business
under contract with a Company or its affiliate to sell and service eligible crop insurance
contracts, and who has: (1) previously sold or serviced an eligible crop insurance contract;
(2) completed one full calendar year of sales and service; and (3) completed all training
requirements for a new agent and has completed and is current on certification requirements
as may be required by FCIC.
Experienced loss adjuster means a person who has: (1) previously adjusted claims for losses
on a an eligible crop insurance contract; (2) completed one calendar year of loss adjustment,
and (3) completed the training requirements for a new loss adjuster and has completed and is
current on certifications requirements as may be required by FCIC.
FSA has the same meaning as the term “Farm Service Agency” in section 1 of the Basic
Provisions.
“Field inspections” means a visit to the policyholder’s farming operation for the purpose of
making findings necessary to determine eligibility, compliance with program terms and
conditions, the correct premium and any indemnity, prevented planting or replant payment,
whether agents and loss adjusters have complied with all applicable procedures and include,
but are not limited to, reviews for preliminary and final loss adjustment, pre-harvest or
growing season inspection, and pre-acceptance inspections, the verification of adequate
records, a determination that the reported practice is being carried out in accordance with
good farming practices, a determination of whether the crop has been replanted, or to
evaluate agent or loss adjuster conduct or the circumstances of a loss.
“File review” means a review of documents contained in a policyholder’s file maintained by
the Company or an affiliate to verify that the information to support that a claim’s approval
or denial is appropriate and accurate based on information required to be obtained under the
applicable procedures and that supporting documents, including actuarial materials, have
been properly used in document completion.
Inspection means the examination as applicable of the insured crop, the information or data
recorded on documents submitted to establish the premium, liability, indemnity or prevented
planting or replant payment or any other information that may be necessary to determine
whether the crop insurance contract constitutes an "eligible crop insurance contract" or the
agent or loss adjuster has complied with procedures. At a minimum, the review process
entails the verification of the information or data to determine whether the information was
timely submitted and accurate.

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New agent means a person, licensed by the State in which the person does business under
contract with Company or an affiliate to sell and service eligible crop insurance contracts on
behalf of the Company, who has not: (1) previously sold or serviced an eligible crop
insurance contract; or (2) completed one full calendar year of sales and service.
New loss adjuster means a person who has not: (1) previously adjusted claims for losses on
an eligible crop insurance contract; or (2) completed one full calendar year of loss
adjustment.
Verification means the determination of whether information submitted is true and accurate
through independent means in accordance with procedures. With respect to certifications,
asking the provider of the information whether the information is true and accurate does not
constitute verification. Information from independent third parties or independent
documentation must be obtained.
II. TRAINING OF AGENTS, LOSS ADJUSTERS, AND OTHER PERSONNEL
A.

GENERAL COMPANY RESPONSIBILITIES
In general, the Company is responsible for:

B.

(1)

Identifying and documenting the training needs of the employees, agents, agency
employees, loss adjusters and contractor that act on behalf of the Company with
respect to the applicable procedures and requirements associated with selling and
servicing eligible crop insurance contracts.

(2)

Training all persons identified in paragraph (1) in a timely manner so that
program delivery, participation, and operation will not be adversely affected.

(3)

Maintaining and retaining data required by section II.A.8. of the Agreement
electronically, or by hard copy, in order to adequately evaluate the historical
performance of such persons.

(4)

Conducting other training that may be required by FCIC. Nothing in these
requirements precludes the Company from providing training that exceeds these
requirements.

SALES TRAINING CURRICULUM AND REQUIREMENTS
(1)

Training curriculum developed by the Company must include those eligible crop
insurance contracts which the Company indicates in Appendix II it will be selling
or servicing in the State, and include at a minimum (for new agents and
applicable employees, comprehensive information on all of the following, and for
experienced agents and applicable employees, comprehensive information on
updates or changes in the following), sufficient information to make such persons
proficient in:

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(a)

The meaning of the terms and conditions of the Common Crop Insurance
Policy, Basic Provisions and applicable Crop Provisions, published at 7
C.F.R. part 457, and the other available plans of insurance such as the
Group Risk Plan published at 7 C.F.R. part 407, and the revenue insurance
plans, pilot programs, and other plans of insurance found on FCIC’s website
at www.rma.usda.gov, and any changes thereto;

(b)

All applicable endorsements, Special Provisions and options and any
changes thereto;

(c)

The benefits and differences between the applicable plans of insurance
specified in subparagraph (a);

(d)

The actuarial documents and their usage;

(e)

The requirements in the procedures applicable to the sales and service of
eligible crop insurance contracts and any changes thereto;

(f)

How to properly fill out and submit all applicable forms, documents, notices
and reports;

(g)

The requirements under applicable Federal civil rights statutes and methods
to encourage program participation, including participation of limited
resource, women, minority, and under served producers or in under served
areas;

(h)

The benefits of the available risk management products and applicability
and suitability to farming conditions and operations in the relevant area;

(i)

How to recognize anomalies in reported information and common indicators
of misrepresentation, fraud, waste or abuse, the process to report such to the
Company, and appropriate actions to be taken when anomalies or evidence
of misrepresentation, fraud, waste or abuse exist; and

(j)

Other requirements as may be determined by FCIC.

(2) Before the Company may permit persons identified in subsection A. to sell or
service any eligible crop insurance contract:
(a)

The new agent or other applicable person (including any other person who
solicits or otherwise promotes crop insurance sales on behalf of the
Company) must participate in a structured training program of at least 12
hours on all of the items listed in paragraph (1).

(b)

The experienced agent or other applicable person must annually complete at

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least 3 hours of structured training, on updates or changes specifically
related to the items listed in paragraph (1), or that are identified by FCIC or
the Company as deficient during the quality control reviews or processing of
the sales related documents.

C.

(c)

All agents and other applicable person must pass a basic competency test
before they can sell or service an eligible crop insurance contract (all results
must be maintained by each Company in accordance with section II.A.6.a.
and IV.G. of the Agreement). Basic competency tests must specifically
relate to the items listed in paragraph (1) and determine the proficiency of
the person who completed the required training to sell and service eligible
crop insurance contracts. Additionally, the Company must review the test
results and document follow-up training initiatives for any area of identified
weakness on the part of any one or more persons.

(d)

All agents and applicable persons must retake and pass the basic
competency test every three years.

(e)

If the agent or other applicable person was not employed by or did not
contract with the Company in previous years, the Company must obtain and
have available upon request, documentation that the agent or other
applicable person has passed the basic competency test within the past 3
years with another AIP.

LOSS ADJUSTMENT TRAINING CURRICULUM AND REQUIREMENTS
(1)

Training curriculum developed by the Company must include those eligible crop
insurance contracts which the Company indicates in Appendix II it will be selling
or servicing in the State, and include at a minimum (for new loss adjusters or
applicable employees, all of the following and for experienced loss adjusters or
applicable employees, updates and changes), sufficient information to make such
persons proficient in:
(a)

The items listed in subsections B.(1)(a), (b), (c), (d), (f), (i), and (j);

(b)

The requirements in the procedures applicable to adjustment of claims for
eligible crop insurance contracts and any changes thereto;

(c)

How to properly verify the accuracy of the information contained on
applicable forms, documents, notices and reports;

(d)

How to properly determine the amount of production to be used for the
purposes of determining losses;

(e)

The requirements under applicable Federal civil rights statutes; and

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(f)
(2)

Other requirements as may be determined by FCIC.

Before the Company may permit persons identified in section II.A. to adjust or
sign any claim for any eligible crop insurance contract:
(a)

The new loss adjuster or other applicable person must participate in a
structured training program of at least 60 hours on all of the items listed in
paragraph (1) (including at least 24 hours of classroom training).

(b)

The experienced loss adjuster or other applicable person must annually
complete at least 18 hours of structured training (including at least 6 hours
of classroom training), on updates or changes specifically related to the
areas listed in paragraph (1) or that are identified by FCIC or the Company
as deficient during the quality control reviews or processing of the sales
related documents.

(c)

All loss adjusters and other applicable persons must pass a basic
competency test (all results must be maintained by each Company in
accordance with section II.A.6.a. and IV.G. of the Agreement). Basic
competency tests must specifically relate to the areas listed in paragraph (1)
and determine the proficiency of the persons who completed the required
training to accurately and correctly determine the amount of the loss and
verify applicable information. Additionally, the Company must review the
test results and document follow-up training initiatives for any area of
identified weakness on the part of any one or more new loss adjusters or
experienced loss adjusters.

(d)

All loss adjusters and other applicable persons must retake and pass the
competency test every three years.

(e)

The Company must obtain and have available upon request, documentation
for any loss adjuster or other applicable persons that has passed the basic
competency test within the past 3 years with another AIP to fulfill the
requirements of this paragraph.

III. QUALITY CONTROL GUIDELINES
A.

GENERAL COMPANY RESPONSIBILITIES
In general, the Company is responsible for:
(1)

Conducting all quality control reviews required under this section through
objective and unbiased persons, who were not involved in establishing the
guarantee or adjusting the loss, or in the sales or supervision of sales for the
eligible crop insurance contract reviewed.

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(2)

Verifying the information provided by the policyholder, agent, and loss adjuster is
true and accurate through means, including, but not limited to, interviews, field
inspections, file reviews, and obtaining production or other records from third
parties.

(3)

Verifying that the information was provided timely.

(4)

Verifying that the crop insurance contract constitutes an eligible crop insurance
contract.

(5)

Implementing procedures for detecting and reporting any instance of fraud, waste,
and abuse by policyholders, employees or affiliates.

(6)

Correcting applicable monetary or actual production history discrepancies as
required by FCIC and timely process such corrections to reconcile monthly
accounting and statistical reports to reflect corrections, consistent with the
Agreement.

(7)

Implementing administrative procedures to resolve and correct errors and assure
accurate premium and loss determinations.

(8)

Maintaining loss files containing adequate supporting documentation, loss
adjuster reports or any other necessary evidence to support the payment or denial
of claims, including the actions taken to verify the applicable information.

(9)

Notifying FCIC of suspected fraud, waste or abuse in accordance with section IV
of this Appendix and assisting FCIC in subsequent investigations.

(10) Establishing a process to respond to policyholder complaints received directly
from the public, state insurance departments, or complaints referred to the
Company by FCIC or by the Company to FCIC, documenting the complaint and
actions taken by the Company in response, and providing such documentation to
FCIC upon request.
(11) Following procedures related to companion eligible crop insurance contracts in
force for other persons sharing in the crop.
(12) Retaining all documents obtained in the course of the reviews conducted and all
completed forms as required by the Agreement.
(13) Providing an outline of the plan the Company will use in carrying out its quality
control program with the Plan of Operation. The quality control plan must
include:
(a)

The names and titles of the persons who will have oversight
responsibilities for the reviews required under this section.

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(b)

The types of reviews conducted (random sampling, FCIC designated,
discretionary, etc.) and the time period when such eligible crop insurance
contracts will be selected for each review.

(c)

A complete description of the process to be followed by the reviewers for
conducting each of the reviews required under this section.

(14) Conducting such other reviews (including monitoring programs) as may be
determined necessary by FCIC to protect program integrity.
(15) Taking such actions as directed by FCIC to correct systemic, procedural, or
other problems revealed by the quality control reviews.
(16) Preparing and providing to FCIC, in a form determined by FCIC, not later than
April 30 following each crop year (first report will be due April 30, 2006), an
annual summary report detailing the results of the quality control program that
will, at a minimum:
(a)

For eligible crop insurance contracts which did not have discrepancies or
incorrect information detected: Identify by contract number and crop, the
name and title of the person who conducted the review for the respective
eligible crop insurance contract, the date the review was completed, and
the type of review conducted.

(b)

For eligible crop insurance contracts which had discrepancies or incorrect
information: Identify by contract number and crop, the name and title of
the person who conducted the review for the respective eligible crop
insurance contract, the date the review was completed and the type of
review conducted, the type of discrepancy or incorrect information
detected, the monetary effect or the effect on the APH, and the corrective
action taken.

(c)

Include other relevant quality control information that may be
required by FCIC (e.g., error rates).

(d)

Such other information as may be required by FCIC.

(17) At the request of FCIC, provide copies of documentation completed by the
reviewers for any of the reviews required under this section.
(18) Reviewing claims in excess of $100,000 and reporting the results to FCIC in the
annual report.
(a)

The review will consist of an examination of the information pertaining to
the guarantee and loss, including the results of field inspections, to

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determine whether the claim can be substantiated. The Company must
document the verification of the reported information pertaining to the
claim and the sources used for verification.
(b)
B.

C.

If the review reveals errors in the claim, the Company must correct the
claim or deny the claim.

FCIC RESPONSIBILITIES
(1)

FCIC will evaluate the Company's annual report to assess its compliance with
this Appendix.

(2)

FCIC will conduct periodic compliance evaluations of the Company's quality
control programs to determine compliance with the requirements of this
Appendix, assess the effectiveness of the systems, and the accuracy of the
Company's conclusions with regard to the quality control reviews conducted
under this section.

(3)

FCIC will conduct periodic evaluations or reviews of the operations of the
Company or its affiliates relating to the Federal crop insurance program.

SPECIFIC REVIEW REQUIREMENTS
The Company is required to conduct the following reviews on a crop year basis unless
otherwise specified herein.
(1)

Program Reviews.
(a)

Review the anomalies identified by FCIC, or its designee, that suggest
abnormal or unusual underwriting or loss performance and conduct
reviews of eligible crop insurance contracts for which the anomalies
appear, not to exceed 3 percent of indemnified eligible crop insurance
contracts for the crop year, unless information from the review or other
information received by FCIC leads FCIC to require the Company review
additional contracts to address particular program integrity concerns.

(b)

Review eligible crop insurance contracts identified in subparagraph (a) in
order to determine whether or not such contracts are in compliance with
all applicable program requirements. Eligible crop insurance contracts
may be selected based on various underwriting or loss criteria, but the
Company will perform a review to determine if the information used to
establish coverage and pay claims is complete and accurate.

(c)

A review will be considered acceptable if there is sufficient
documentation to determine the accuracy of the original underwriting or
claim information and may include field inspections, file reviews, and

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obtaining documentation from third parties as necessary.
(2)

APH Tolerance Reviews
(a)

As provided in subparagraph (b), the Company must conduct reviews for
those Category B and C eligible crop insurance contracts, as specified in
the procedures, with a unit having a newly certified yield equal to or
greater than 150 percent of the prior years’ approved APH yield, if the
database contains 3 or more years of actual records, for the crop year
certified that have been identified by FCIC.

(b)

The Company must review a minimum of 10 percent of crop insurance
units (including required CIH Excessive and Maximum Yield reviews)
meeting the criterion in subparagraph (a). During the review process, the
Company will:
(i)

Review the production reports and yields certified on a crop basis;

(ii)

Review all units for each crop year wherein the actual yields were
certified for the selected crop (For example, if the policyholder
certified actual yields for the 2 most recent crop years on the current
production report, all units for both years will be reviewed);

(iii) Obtain acceptable records, as defined in procedures, from the
policyholder to determine the accuracy of the certified yields and the
established unit structures;
(iv) If the supporting records furnished are questionable, obtain the
information from other sources such as grain dealers, processors, and
first handlers of the commodity to verify the validity of the records
and certifications;
(v)

Recalculate the yield for each unit based on the acceptable records
provided by the policyholder or obtained from other sources;

(vi) Revise production reports when the calculated yield varies by more
than allowable tolerances (Approved APH tolerances and the
procedures for correcting APH errors and erroneous yield
certifications are contained in the procedures);
(vii) Verify the policyholder’s status as a new producer, as defined in
procedures; and
(viii) Correct any incorrect transitional yield.
(3)

Conflict of Interest Reviews

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(a)

The Company must conduct inspections for eligible crop insurance
contract claims of persons directly associated with the Federal crop
insurance program (i.e., employees or affiliates of the Company or
employees of FCIC).

(b)

The Company must notify in writing its employees and affiliates who are
involved in the sale, service, or delivery of eligible crop insurance
contracts, loss adjustment of eligible crop insurance contracts, or the
supervision of either, of the rules regarding conflicts of interest contained
in the Agreement and applicable procedure.

(c)

Applicable employees and affiliates will be required each year to submit a
signed statement that verifies awareness of the conflict of interest rules
and an agreement to abide by them.

(d)

In addition to the requirement in (c), and in accordance with the
requirements of section IV.F.4.h. of the Agreement, applicable employees
and affiliates must annually disclose the required information by the
applicable acreage reporting date. Such disclosure must include the name
of the policyholder or person with a substantial beneficial interest in the
policyholder, and the type of relationship.

(e)

If the applicable employee or affiliate enters into a business, financial
legal or familial relationship with the policyholder after the annual
disclosure, the applicable employee or affiliate must disclose the
information required in subparagraph (d) within 15 days of the entering
the relationship.

(f)

The Company must evaluate the business, financial or legal relationship to
determine whether the applicable employee or affiliate is in violation of
section IV.F.4.d. of the Agreement or whether a conflict of interest review
is necessary to determine if such violation has occurred. At a minimum,
such reviews will be necessary when:
i.

The applicable employee or affiliate has a familial relationship with
the policyholder or a person with a substantial interest in the
policyholder; or

ii.

The business, financial relationship or legal relationship with the
policyholder has the potential to produce an incentive to create or
inflate a loss because the applicable employee or affiliate, or a
relative of the employee or affiliate, is entitled to a portion of the
proceeds of the crop or the crop insurance payment or would
otherwise receive a benefit from the policyholder based on the
existence of crop insurance and their relationship.

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(g)

(4)

If a conflict of interest review is necessary, it will consist of a inspection
for the eligible crop insurance contracts for which the conflict of interest
exists.

Simplified Claims Reviews
If the Company elects to use the Simplified Claims Process approved by
FCIC, the Company must conduct inspections in accordance with procedures.

(5)

Consecutive Loss Adjuster Reviews
In accordance with section IV.F.4.c. of the Agreement, the Company must
conduct reviews on not less than 15 percent of the claims identified by FCIC
to determine whether or not the claims are in compliance with all applicable
program requirements.

IV.

REPORTING SUSPECTED MISREPRESENTATION, FRAUD, WASTE, AND
ABUSE
A.

COMPANY RESPONSIBILITIES
In all cases where the Company or its affiliates reasonably suspects
misrepresentation, fraud, waste or abuse based on any evidence, including but not
limited to, losses, production or yields that deviate significantly from other
producers in the area, unverifiable harvested production, personal knowledge that
contradicts any information provided by the policyholder or any other person who
provides information with respect to the eligible crop insurance contract, the
Company must:

B.

(1)

Immediately review, document, and report to FCIC such cases.

(2)

Forward all information and documents in the possession of the Company
regarding the suspected misrepresentation, fraud, waste or abuse to the
appropriate FCIC compliance office for the area.

(3)

If the Company’s review does not find adequate evidence to support a conclusion
that a misrepresentation, fraud or waste and abuse has occurred, maintain all
documents relating to the complaint and any actions taken in accordance with
section IV.G. of the Agreement.

(4)

Conduct a follow-up review on the policyholder in the crop year immediately
following the year in which the suspected wrongdoing occurred.

FCIC RESPONSIBILITIES

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(1)

FCIC compliance field offices will monitor reports and findings of
misrepresentation, fraud, waste or abuse and assist the Company in conducting
inquiries to the extent possible.

(2)

In cases of actual or suspected fraud, FCIC will refer the information to the
Office of Inspector General (OIG) for action.

(3)

FCIC compliance field offices will notify the Company of the actions deemed
necessary by the OIG.

(4)

If the OIG declines investigation, the FCIC compliance field office will
determine whether administrative action is appropriate and will notify the
Company of the actions taken.

V. LARGE CLAIMS REVIEWS
A.

The Company must immediately notify FCIC of a potential claim on an eligible crop
insurance contract, which is likely to exceed $500,000, or such other amounts as
determined by FCIC, and the production losses under such claim are likely to exceed
such amount.

B.

FCIC may, at its option, review or determine the losses for potential claims that are
equal to or greater than the amount specified in subsection A. FCIC reserves the right
to select any potential claim for review or to participate in the loss determination.
Within 3 business days of notice by the Company of a potential claim under this
subsection, FCIC will notify the Company whether it will review or participate in the
loss determination.

C.

If FCIC elects to review a potential claim, the Company is required to provide a copy
of all documents associated with the claim as specified by FCIC.

D.

If FCIC elects to participate in the loss determination, the Company must notify FCIC
of and give FCIC the opportunity to participate in all aspects of the loss adjustment
process, including field inspections.

E.

If there is a dispute between FCIC and the Company with respect to FCIC’s
determination of a loss under this subsection, the Company will pay the claim in
accordance with FCIC’s approval, but retains the right to dispute FCIC’s actions in
accordance with the administrative appeals procedures found in 7 C.F.R. part 400.169.

F.

With respect to any claim where FCIC participates in the loss determination, or revises,
modifies or corrects any claim for loss under this subsection, any dispute by the eligible
producer regarding the amount of the claim must be brought against FCIC.

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