The Basics of Specialty Crop Insurance
As new crops develop and gain public interest, certain farmers are left without viable crop insurance. Crop insurance is heavily regulated and controlled by the Federal Crop Insurance Corporation and its partnership with certain private insurance companies. Insurance for new crops is not broadly available until it is approved by the FCIC. These new crops not historically supported by the federal insurance programs are called “specialty” crops–with almonds, citrus and grapes the largest among them. This post covers how the private sector, including farmers and researchers, can work together to develop what’s called specialty crop insurance.
Overview
The Risk Management Agency (RMA) is the arm of the FCIC which oversees the development of specialty crop insurance through the private sector. The specific procedures for submission are identified at 7 U.S.C. §1508(h), a.k.a. Section 508(h) of the Federal Crop Insurance Act.
To get started, private individuals or entities can either attempt to contract with the RMA directly or submit to the FCIC “unsolicited” proposals quarterly, by the fifth business day of January, April, July or October.
Scope of Section 508(h) Proposals
This can vary. The private party can submit rate premiums or risk-provisions, or full-blown crop insurance policies. All of these are called “Section 508(h) proposals” and can take about a year to review.
In general, the submission must identify a “recognized need” within a population that has some sort of ownership interest in the specialty crop (i.e. the insured actually has to some right to the crop or livestock). You will have to demonstrate a tangible “demand” for the commodity as well, which could mean documentation from local producers or insurance companies showcasing how extensive the need is to justify the cost for implementation. Similarly, if the risks identified in the proposal are generally covered under similar policies, the FCIC board cannot approve of the submission.
Getting credible rate and pricing data is also a must. You’ll have to consider yield or development-cost risk (i.e. does it die with a little snow, or does the commodity take extra-special care and expense to grow), depending on the type of policy you’re proposing. Be sure to create a well-rounded picture with information from multiple producers, commodity groups or independent research organizations, which can include anything from prior publications, contracts reflecting various pricing values, or weather analytics. The full “Checklist” of items needed for a specialty crop 508(h) proposal can be found here.
Scope of “Concept Proposals”
Alternatively, RMA also offers preliminary “concept proposal” review, wherein the board may advance up to 50% of the anticipated development cost for one of the above-referenced submissions. While the same concepts identified above generally apply, there are some specific steps to follow for this sort of proposal, as outlined here. Choosing this route allows you] to continue to receive reimbursement once the products reach the market for another three years, and potentially thereafter depending on whether you want to continue ownership and maintenance of the specialty crop product.
What Happens if Your Specialty Crop is Approved
Whatever route you choose, if the FCIC board approves, a pilot program is generally put in place for a limited area for around four years. If you do not relinquish ownership rights in the product, there’s a slew of data reporting to follow, which you can see here.
Overall, while developing specialty crop insurance products is an extensive process, it can create greater public access to a variety of commodities and continue to enhance diversity in the market.
Questions about Developing Specialty Crop Insurance or Navigating Crop Insurance in General? Let’s chat. Contact us at contact@groveslaw.ag to schedule a consultation.
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Kara Groves
After earning her law degree from University of Florida Levin College of Law and working as a tort defense litigator, Kara is settling down and bought some acreage out in Mount Dora. She has returned to her sustainable, regulatory background to help farmers and locally-focused businesses innovate and capitalize on direct-to-consumer movements across the state. In her off time, Kara is an avid gardener and cook. You’ll often find her in downtown Mount Dora adding to her plant collection or taking client meetings in the local brewery and marketplace.
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