Common Crop Insurance Regulations, Basic Provisions; and Various Crop Insurance Provisions, 15778-15891 [2010-6432]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 75, Number 60 (Tuesday, March 30, 2010)]
[Rules and Regulations]
[Pages 15778-15891]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6432]



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Part II





Department of Agriculture





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Federal Crop Insurance Corporation



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7 CFR Part 457



Common Crop Insurance Regulations, Basic Provisions; and Various Crop 
Insurance Provisions; Final Rule

Federal Register / Vol. 75 , No. 60 / Tuesday, March 30, 2010 / Rules 
and Regulations

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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB96


Common Crop Insurance Regulations, Basic Provisions; and Various 
Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Common Crop Insurance Regulations, Basic Provisions, Small Grains Crop 
Insurance Provisions, Cotton Crop Insurance Provisions, Sunflower Seed 
Crop Insurance Provisions, Coarse Grains Crop Insurance Provisions, 
Malting Barley Crop Insurance Provisions, Rice Crop Insurance 
Provisions, and Canola and Rapeseed Crop Insurance Provisions to 
provide revenue protection and yield protection. The amended provisions 
replace the Crop Revenue Coverage (CRC), Income Protection (IP), 
Indexed Income Protection (IIP), and the Revenue Assurance (RA) plans 
of insurance. These individual plans of insurance will no longer be 
available. The intended effect of this action is to offer producers a 
choice of revenue protection (protection against loss of revenue caused 
by low prices, low yields or a combination of both) or yield protection 
(protection for production losses only) within one Basic Provisions and 
the applicable Crop Provisions to reduce the amount of information 
producers must read to determine the best risk management tool for 
their operation and to improve the prevented planting and other 
provisions to better meet the needs of insured producers. In addition, 
FCIC has revised the Texas Citrus Tree Crop Insurance Provisions, Pear 
Crop Insurance Provisions, Sugarcane Crop Insurance Provisions, 
Macadamia Tree Crop Insurance Provisions, Macadamia Nut Crop Insurance 
Provisions, Onion Crop Insurance Provisions, Dry Pea Crop Insurance 
Provisions, Plum Crop Insurance Provisions, and Cabbage Crop Insurance 
Provisions to correct specific references to the revised Common Crop 
Insurance Regulations, Basic Provisions. Further, FCIC has revised 
certain provisions to incorporate provisions from previous rules 
implementing the Food, Conservation, and Energy Act of 2008 (2008 Farm 
Bill).

DATES: Effective Date: This rule is effective April 29, 2010.
    Applicability date: The changes will apply for the 2011 and 
succeeding crop years for all crops with a 2011 contract change date on 
or after April 30, 2010, and for 2012 and succeeding crop years for all 
crops with a 2011 contract change date prior to April 30, 2010.

FOR FURTHER INFORMATION CONTACT: Janice Nuckolls, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, P.O. Box 419205, Stop 0812, Room 421, Kansas City, MO 
64141-6205, telephone (816) 926-7730. For a copy of the Cost-Benefit 
Analysis, contact Leiann Nelson, Economist, at the office, address, and 
telephone number listed above.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, it has been reviewed by the 
Office of Management and Budget (OMB).

Cost-Benefit Analysis

    A Cost Benefit Analysis has been completed and is available to 
interested persons at the Kansas City address listed above. In summary, 
the analysis finds the revised provisions in the final rule will have 
positive potential benefits for producers and insurance providers. The 
PayGo impact of changing the rapeseed price mechanism for revenue 
coverage to make the harvest price equal to the projected price is 
estimated at $5,233. The effect of this change is to reduce the risk, 
which will lower the premium rate for MPCI coverage, lower the amount 
of premium subsidy paid due to the lower premium, and decrease the 
indemnity paid.
    A misreported information penalty was put into place in the 2005 
crop year. The misreporting penalty was based on any reported 
information that resulted in liability greater than 110.0 percent or 
lower than 90.0 percent of the actual liability determined for the 
unit. The policy already provided a penalty for misreported acres and 
yields and when the misreporting factor was also applied to the 
indemnity, the penalty was overly harsh. In addition, the penalty was 
difficult to determine and administer. The total indemnity withheld in 
2005 due to the misreported information factor penalty was slightly 
under $2.7 million and involved just over 608,000 acres.
    Combining yield protection (protection for production losses only) 
and revenue protection (protection against loss of revenue caused by 
changes in prices, production losses or a combination of both) within 
the current Basic Provisions and applicable Crop Provisions will 
minimize the quantity of documents needed in the contract between the 
producer and the insurance provider. A producer benefits because he or 
she will not receive several copies of largely duplicative material as 
part of the insurance contract if he or she elects to insure different 
crops under different plans of insurance. Insurance providers benefit 
because there is no need to maintain inventories of similar materials, 
thus eliminating the potential for providing an incorrect set of 
documents to a producer by inadvertent error. Benefits will accrue due 
to avoided costs (the resources needed to duplicate and administer 
contract documents), which are intangible in nature. The cost to 
prepare, publish, store, and mail multiple copies of similar documents 
is avoided.
    Revisions to the prevented planting provisions will clarify certain 
terms and conditions to reduce fraud, waste, and abuse. For example, 
the prevented planting payment amount has been changed so that it will 
not exceed the payment level for the crop prevented from being planted. 
Current provisions allow payment based on another crop when there are 
no remaining eligible acres for the crop prevented from being planted. 
Previously, the payment was based on the other crop even when its value 
was higher. The provisions still allow eligible acres for another crop 
to be used but limit the payment amount to the crop prevented from 
being planted.
    The CRC, RA, IP, and IIP plans of insurance currently use a market-
price discovery method to determine prices. This final rule generally 
uses the same method for determining the projected price for crops with 
both revenue protection and yield protection. The benefits of this 
action to FCIC are that it will no longer be required to make multiple 
estimates of the respective prices for these crops. Insurance providers 
benefit because they no longer will be required to process multiple 
releases of the expected market price for a crop year. Producers also 
benefit because the price at which they may insure the crops included 
under yield protection should more closely approximate the market value 
of any loss in yield that is subject to an indemnity. In addition, the 
variation in prices between yield protection and revenue protection 
will be reduced. There are essentially no direct costs to provide these 
pricing benefits because

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the pricing mechanisms to be used are essentially the same as those 
currently being used for the revenue plans of insurance listed above. 
All required data are available and similar calculations are currently 
being made.
    These changes will simplify administration of the crop insurance 
program, reduce the quantity of documents and electronic materials 
prepared and distributed, better define the terms of coverage, provide 
greater clarity, and reduce the potential for fraud, waste, and abuse.
    Many of the benefits and costs associated with this rule cannot be 
quantified. The qualitative assessment indicates the benefits outweigh 
the costs of the regulation.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control number 0563-0053. The revisions 
made in this regulation may result in minor changes in how the 
information is collected, but the fundamental nature of the information 
collection is not changing.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act authorizes FCIC to waive 
collection of administrative fees from limited resource farmers. FCIC 
believes this waiver helps to ensure that small entities are given the 
same opportunities as large entities to manage their risks through the 
use of crop insurance. A Regulatory Flexibility Analysis has not been 
prepared since this regulation does not have an impact on small 
entities, and, therefore, this regulation is exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    This rule finalizes changes to the Common Crop Insurance 
Regulations; Basic Provisions, Small Grains Crop Insurance Provisions, 
Cotton Crop Insurance Provisions, Sunflower Seed Crop Insurance 
Provisions, Coarse Grains Crop Insurance Provisions, Malting Barley 
Crop Insurance Provisions, Rice Crop Insurance Provisions, and Canola 
and Rapeseed Crop Insurance Provisions to provide revenue protection 
and yield protection in one policy and to make other changes that were 
published by FCIC on Friday, July 14, 2006, as a notice of proposed 
rulemaking in the Federal Register at 71 FR 40194-40252. The public was 
afforded 60 days to submit written comments after the regulation was 
published in the Federal Register. Based on comments received and 
specific requests to extend the comment period, FCIC published a notice 
in the Federal Register at 71 FR 56049 on September 26, 2006, extending 
the initial 60-day comment period for an additional 30 days, until 
October 26, 2006.
    A total of 897 comments were received from 88 commenters. The 
commenters were insurance providers, attorneys, trade associations, 
State agricultural associations, agents, an insurance service 
organization, producers, State departments of agriculture, grower 
associations, agricultural credit associations, and other interested 
parties.
    The public comments received regarding the proposed rule and FCIC's 
responses to the comments are listed below (under applicable subject 
headings) identifying issues and concerns, and the changes made, if 
any, to address the comments.

Commodity Exchange Price Provisions

    FCIC received a number of comments regarding the Commodity Exchange 
Price Provisions (CEPP). Numerous comments were received with respect 
to the CEPP including, but not limited to, comments requesting: (1) 
Reinstating revenue coverage for sunflowers; (2) Increasing the maximum 
percentage the harvest price can move from 160

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percent of the projected price to a larger amount; (3) Changing the 
projected price discovery period to 30 days; and (4) Establishing an 
earlier price discovery period to allow more time for sales.
    The CEPP was provided for comment as a courtesy to the public and 
it is not part of the regulation and will not be published in the Code 
of Federal Regulations. Therefore, it is not subject to the formal 
notice and comment rulemaking process. As a result, FCIC is not 
publishing its responses to all of these comments in this final rule. 
FCIC thanks the public for their assistance in reviewing the CEPP and 
will consider all comments received and make appropriate changes in the 
CEPP.

Basic Provisions--General

    Comment: Many commenters commended FCIC for their efforts to 
combine CRC, RA, IP, and Actual Production History (APH) into a single 
policy. They stated it will strengthen the efficiency and integrity of 
the program, simplify product selection, reduce unnecessary documents, 
and facilitate producers' understanding of coverage options. The 
commenters stated they were encouraged by many of the revisions 
proposed by FCIC, as they believe these provisions will reduce program 
vulnerabilities, resolve existing ambiguities and increase the 
accountability and responsibility of the producers. They recognized the 
high value of Federal crop insurance to producers and appreciated the 
continuing efforts of FCIC to further improve the effectiveness and 
administration of this important program. A commenter stated using the 
same method for determining prices for both revenue and yield 
protection is a move in the right direction. A commenter stated that 
yield protection prices will more truly reflect expected market prices. 
Another commenter stated that with the price being the same for the two 
coverages, producers will be able to more easily compare revenue 
protection against yield protection, thereby making a more informed 
decision. The commenters stated the procedures proposed by FCIC should 
provide a smooth transition. A commenter stated the combination policy 
also eliminates potential conflicts and mistakes that occur when 
individual plans of insurance are revised independently and 
differently. A commenter stated the proposed rule will govern the 
future terms and conditions by which producers will be insured against 
price and production risks under the Federal crop insurance program, 
and believed the ultimate success of the rule will be measured in 
direct proportion to the level of attention paid to each and every 
detail and the level of collaboration with insurance providers who 
deliver these important risk management products. The commenter stated 
careful avoidance of any unintended consequence, as well as substantive 
and procedural changes that have not been thoroughly vetted, whether 
such changes are express or implied, is absolutely critical.
    Response: FCIC agrees combining the different plans of insurance 
into one program will be beneficial. FCIC also agrees generally using 
the same projected price by crop for both yield protection and revenue 
protection for all crops for which revenue protection is available 
should reflect expected market prices and assist the producer to make 
an informed decision when choosing between revenue and yield 
protection. However, the projected price for yield and revenue 
protection may not always be the same because FCIC reserves the right 
to set the projected price for yield protection to a price determined 
by FCIC. FCIC also agrees the revisions will reduce program 
vulnerabilities, resolve existing ambiguities, and increase the 
accountability and responsibility of the producers. The regulation is 
thoroughly reviewed to ensure the crop insurance program provides 
producers with viable risk management tools and can be marketed 
successfully.
    Comment: A commenter stated the Federal crop insurance program is 
unique among Federal programs. Insurance providers must market and sell 
the products authorized under the program and farmers and ranchers, in 
turn, must make significant financial investment in risk management 
products most appropriate to their operations. Accordingly, the 
commenter believed it is inappropriate to review the proposed rule in 
the same context as an entitlement program, which is made available by 
the government and received by beneficiaries free of cost and usually 
without choices. Rather, the proposed rule should be reviewed to ensure 
risk management products offered under the program can be effectively 
marketed and sold by insurance providers in such a manner that 
consumers can make prudent risk management investments based on 
informed decisions.
    Response: FCIC agrees that the Federal crop insurance program 
should not be reviewed strictly as an entitlement program. Unlike 
entitlement programs that are offered free of cost, most producers 
invest their premium dollars in the purchase of insurance. However, 
those premiums are also heavily subsidized by taxpayer dollars so FCIC 
has a heightened duty to protect program integrity and ensure the 
program operates in an actuarially sound manner and the review has been 
conducted accordingly.
    Comment: A commenter suggested the proposed regulation did not 
simplify the regulations and they saw no benefit to the public. Another 
commenter stated the proposed rule is a serious and complex proposal 
that should be fully explained to companies, agents, and producers in 
order for FCIC to get the maximum benefit from their input. The 
commenter stated they have some concerns and reservations about the 
effectiveness of the proposed rule in achieving its stated objectives 
of providing greater simplification. The proposed rule presents new 
definitions and new changes that could make things even more 
complicated and difficult to learn than the present system. For 
instance, for just corn and soybean producers, there are 51 changes and 
32 new definitions. While they applaud FCIC's intent to simplify what 
is nearly universally identified as an overly complex and burdensome 
program, they believe the agency could use this major restructuring as 
an opportunity to truly simplify the program for producers and agents 
alike and not merely shift 5 complicated and complex coverages (APH, 
RA, CRC, IP, and IIP) into one massively complicated and complex Basic 
Provisions and the applicable Crop Provisions.
    Response: Previously, CRC, RA, IP and IIP all provided revenue 
coverage with different pricing mechanisms, varying unit structure, 
different underwriting rules, different rating structures, and 
different availability of crops and options. This meant that agents and 
producers were required to examine the coverages and terms and 
conditions, for each separate plan of insurance every year to determine 
which plan of insurance offered the best risk management fit for the 
producer. In this final rule, most of the differences between these 
plans of insurance have been eliminated so that now there is only one 
pricing mechanism for revenue coverage, the unit structures have been 
standardized, the options have been standardized, and the rating 
methodology has been standardized. This effort alone will eliminate 
considerable complexity within the program. As a result, except for the 
addition of revenue coverage, the policy terms remained substantially 
the same because all the unit structures, options, etc., were already 
available under the APH Basic Provisions. This should also simplify the 
training of agents.

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    Further, the changes made to incorporate the revenue plans of 
insurance into the APH Basic Provisions and Crop Provisions should not 
be confused with the other changes made to enhance coverage and protect 
program integrity. While these changes will also have to be explained 
to producers and agents, such changes were necessary regardless of 
whether the revenue coverage was added to the APH Basic Provisions and 
Crop Provisions. FCIC believes the additions and revisions in this 
regulation simplify and improve the crop insurance program.
    Comment: Several commenters urged FCIC to hold a public hearing or 
a series of public hearings on the proposed rule and extend the public 
comment period. They stated public hearings will further enable the 
producer, agent, and insurance groups to fully understand the scope and 
potential impact the proposed changes will have on the entire Federal 
crop insurance program so they can offer additional comments to FCIC. A 
commenter stated it is vital the agency provide adequate time for both 
producers and private insurance providers to fully educate themselves 
about the proposed changes. A commenter stated the comment period 
established from July 14, 2006 to September 12, 2006 has come at the 
busiest time for most farmers in the Pacific Northwest because it is 
harvest season, then it is time to begin the fall seeding of winter 
wheat. A few commenters believed it would improve the opportunity for 
many more farmers to respond if the comment period could be extended 
another 50-60 days. Growers across the country rely heavily on the 
Federal crop insurance system and allowing them the opportunity to 
provide direct input is vital to improving the effectiveness of this 
program.
    Response: FCIC determined that public hearings were not 
appropriate. To provide meaningful participation of all program 
participants, numerous meetings would have been required. Further, the 
scheduling, implementation, and efforts to record and collect comments 
would have required massive resources and could have delayed the 
implementation of this rule by years. Instead of public hearings, FCIC 
elected to reopen the comment period and on September 26, 2006, a 
notice of reopening and extension of the comment period was published 
in the Federal Register. Written comments and opinions on the proposed 
rule were accepted until close of business on October 26, 2006.
    Comment: A few commenters applauded FCIC for moving forward with 
consultation of producer and insurance groups. They thanked FCIC for 
engaging in this comprehensive review of the impact the proposed rule 
could have on all participants in the crop insurance program.
    Response: FCIC did not consult with producer groups or insurance 
groups during the comment period. FCIC held requested informational 
meetings where it provided explanations regarding the proposed 
provisions. FCIC did not solicit or accept comments during these 
informational meetings. FCIC hopes such meetings were helpful in 
explaining the proposed changes so that audience members could provide 
meaningful written comments through the rulemaking process.
    Comment: A few commenters stated one issue that is not fully 
explained, but that is of critical importance, is the impact these 
changes may have on premium rates. If a significant level of re-rating 
becomes necessary, it could have significant impacts on producers. A 
commenter noted that, while not part of the proposed rule, the rating 
of Group Risk Protection (GRP) and Group Risk Income Protection (GRIP) 
policies nevertheless affect policies included in the proposed rule. 
The commenter believed any rating method changes should be fully vetted 
with insurance providers to ensure a complete understanding of the 
proposed rule and its impact on farmers and ranchers. The commenter 
strongly urged FCIC to clearly disclose and discuss rating methods and 
impacts without which a full appreciation of the rule cannot be known 
by companies, agents, or the producers they serve. By providing 
additional information on this issue and others that will arise, FCIC 
will assure the shift to the revised Basic Provisions and applicable 
Crop Provisions is more transparent and will provide adequate 
opportunity for producers to have additional input on issues that might 
negatively impact them.
    Response: Under this rule, one revenue protection approach will 
replace the current multiple approaches contained in the RA, CRC, IP, 
and IIP plans of insurance. The current revenue plans each have a 
different rating methodology. Therefore, the change to a single rating 
methodology for all revenue coverage under the revised Basic Provisions 
and applicable Crop Provisions will make the premium rates less 
variable. As with every crop insurance policy, the risk under such 
policy must be assessed and premium must be calculated to cover that 
risk. This will also occur under this final rule. A preliminary review 
shows that the amount of premium will change by less than five percent 
in the majority of states/crops as a result of the combination of these 
plans of insurance.
    The actual premium rating methodology is a complex process that 
could not be adequately explained in a proposed rule. To the extent 
that persons are interested in FCIC's ratemaking process, information 
is available and can be requested from FCIC. FCIC does not know the 
basis of the commenter's assertion that the premium rating assessment 
under GRP and GRIP will affect the premium under this rule. GRP and 
GRIP offer a significantly different type of coverage than is provided 
under this rule (area versus individual coverage).
    Comment: A commenter stated modern producers need individualized 
risk management and individually rated policy premiums. County data, 
individual production history, and loss ratio data is available. The 
commenter stated that low loss ratios and stable yields get the 
discounts and high loss ratios and variable yields pay the higher price 
and that regardless of the cause for excessive loss (bad farming, 
fraud, or bad luck), those policies should pay a recapture premium. The 
commenter stated that like T-yields, high-risk areas would only need to 
be identified until the actual data was sufficient to take over. The 
actual data should drive the premium. The commenter asserted that 
producers also need a guarantee based on the ability to produce a crop 
in an average year, which is not the same as an average yield. Other 
lines of insurance rely on comparable, not simple, averages. The 
commenter stated the combo process may also be applied to GRP and GRIP. 
The commenter stated that from his desire to provide the best 
individual coverage and premium possible, he saw little reason to waste 
time on group policies. The commenter stated that the term ``group'' is 
misleading (should be called ``County Risk Plan''), because these plans 
do not identify loss nor indemnify for loss and, therefore, the word 
``insurance'' should never be allowed when referencing these plans. The 
commenter provided additional details regarding the problems of product 
misrepresentation brought on by these plans. The commenter stated 
rather than combining county plans, he would just as soon scrap them. A 
lottery (with house odds) is not a proper substitute for insurance.
    Response: Premium rates use actual data and reflect the producer's 
loss history because the lower the yield average, the higher the 
premium rate. If the commenter is suggesting that

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premium rates be developed for each individual producer, such an effort 
would be impossible given the number of insureds and the variability in 
information at the individual level.
    With respect to GRP and GRIP, since FCIC did not propose any 
changes to GRP or GRIP, no changes can be made in the final rule.
    Comment: A commenter was concerned about the implementation 
timeline of the new policy. The commenter stated insurance providers 
will need to receive the final version of the revised Basic Provisions 
and applicable Crop Provisions in adequate time to make the necessary 
system changes, rewrite the agent and adjuster training materials and 
procedure manuals, and then train agents, adjusters, underwriters, etc. 
The commenter asked if there is a timeline available that FCIC plans to 
follow to provide insurance providers adequate time to make the 
required changes and provide training for implementing the new policy. 
The commenter also asked what information FCIC will provide insurance 
providers to assist with implementation.
    Response: At this time, FCIC expects the final rule to be 
implemented for the 2011 crop year. To accomplish this, FCIC will work 
diligently to get the final rule published in the Federal Register in 
time for insurance providers to make system changes, prepare procedural 
documents, and train underwriters, loss adjusters and agents.
    Comment: A commenter recommended creating an insurance policy like 
hail insurance so the producer could insure each crop by field for a 
certain amount of dollars an acre.
    Response: The commenter is proposing a substantive change that 
would require considerable research, development, and notice and 
comment rulemaking. Further, FCIC does not currently have plans to 
conduct a feasibility study for such a policy. However, the commenter 
can develop such a policy and submit it under section 508(h) of the 
Act.
    Comment: A commenter stated Congress passed the Agricultural Risk 
Protection Act of 2000 (ARPA) with a clear intent of expanding crop 
insurance availability, improving coverage levels, and encouraging 
planting flexibility. The commenter urged FCIC to carefully consider 
and assure changes made through this rule are not contradictory to the 
intent of ARPA and/or diminish producer program participation.
    Response: Before provisions are proposed, changes are reviewed with 
consideration given to potential impacts on participation. FCIC does 
not believe that any of the final changes will adversely affect program 
participation, available coverage levels, or planting flexibility. The 
elimination of program complexity may encourage more producers to 
participate.
    Comment: A commenter stated acreage reporting dates for FCIC and 
Farm Service Agency (FSA) should be the same. The commenter believes 
different acreage reporting dates pose a problem for insurance 
providers, agents, and producers and the matter should be revisited to 
ensure the dates are the same (or at least closer) and appropriate. The 
commenter would support making the FSA date closer to or the same as 
the FCIC date.
    Response: Acreage reporting dates are listed in the Special 
Provisions, not in the regulations. Further, no changes have been 
proposed regarding the acreage reporting dates. Therefore, no change 
can be made as a result of this comment. However, FSA and FCIC are 
already reviewing acreage reporting dates with the goal of making them 
the same when practical.
    Comment: A commenter stated FCIC is only meeting the needs of a 
small segment of the economy, rather than meeting the needs of the 
American citizens, as a whole. The commenter stated crop insurance is 
being paid out when there is no damage to the crop. The agency does not 
physically go out and check what is reported to them by agribusiness; 
it just issues checks from the U.S. Treasury. This kind of payout is 
completely unacceptable. The commenter also stated the agency needs 
regular and close auditing to ascertain only actual losses are paid.
    Response: FCIC takes its program oversight responsibilities very 
seriously. However, given the large magnitude of the crop insurance 
program and FCIC's limited resources, it is impossible for it to review 
all or even a large portion of the claims. FCIC has no choice but to 
rely on the activities and audits of insurance providers to ensure that 
claims are properly paid. Further, the Risk Management Agency (RMA) 
Compliance Division conducts routine audits and reviews of the 
insurance providers, taking corrective actions as appropriate. FSA also 
assists this effort by monitoring producers whose losses have been 
outside the norm and notifying RMA when there is suspected fraud, 
waste, or abuse.
    Comment: A commenter questioned whether the premium discount for 
good experience will be applicable to the revised Basic Provisions and 
applicable Crop Provisions. Under CRC, IP, and RA, the good experience 
discount was suspended but retained by the insurance provider in the 
event the insured would change back to APH coverage, at which time the 
experience would be reinstated and applicable. The commenter asks 
whether the good experience discount will now apply to both yield and 
revenue coverage since the new combo product offers both yield and 
revenue coverage.
    Response: Many years ago, FCIC offered a good experience discount 
for producers. This discount was eliminated from the 1985 through 1998 
Crop Provisions as they were revised. However, FCIC allowed those 
producers who had previously qualified for the discount under those old 
policies to continue to receive such discount as long as they continued 
to qualify. There are very few producers who continue to qualify for 
such discounts and they can only qualify for the discount under the 
same terms and conditions that were in effect for the last year such 
discount was available for the crop. Although the good experience 
discount is only available to crops that were insurable at the time the 
discount was offered, the good experience discount did not apply to the 
revenue plans of insurance. Therefore, the discount will be available 
to previously insured crops that now have yield protection, but will 
not be applicable to revenue protection.
    Comment: A commenter stated it was their understanding once the 
proposed rule is finalized, there are plans to combine the GRIP and GRP 
plans of insurance into an area plan revenue and yield product. There 
are some significant changes being recommended in this proposed rule 
that will likely carry over to the area plan products (i.e., removal of 
the misreporting information factor). It would be advantageous to 
everyone who works with these programs that the implementation 
timeframes be as close as possible so that multiple systems and 
different ways of handling things will be minimized.
    Response: FCIC has not proposed any revisions to the GRIP and GRP 
plans of insurance in this rule. Therefore, no changes have been made. 
However, FCIC hopes to propose changes to the GRIP and GRP plans of 
insurance as soon as practicable.
    Comment: A commenter stated there appears to be a geographic 
discrimination favoring southern U.S. farmers that should be addressed, 
if not in the hearings for the proposed rule, at least by RMA/USDA, 
perhaps via administrative directive. Southern farmers have a distinct 
advantage in terms of evaluating the growing season prior to 
determining whether to

[[Page 15783]]

purchase crop insurance. For instance, the closer to planting time a 
decision can be made to buy crop insurance, the better off the farmer 
is in making a sound decision. In Wisconsin, the sales closing date is 
March 15 for corn and soybeans. This date was previously April 1 and 
was changed to March 15 some time ago with no justifiable reason 
provided. It is also 27 days prior to when corn can first be planted. 
The further south you go, the closer those days become (Illinois is 22 
days, Kentucky is 16 days, Mississippi is 11 days, Alabama is 1 day). 
Obviously, this is very discriminatory and should be corrected by FCIC.
    Response: There are locations where the number of days between the 
sales closing date and planting varies. However, section 508(f)(2)(B) 
of the Act limits FCIC's ability to change sales closing dates because 
it requires sales closing dates to be established 30 days earlier than 
the sales closing dates in effect for the 1994 crop year. In addition, 
section 508(f)(2)(C) of the Act specifies that if the revised sales 
closing date would be earlier than January 31, the spring sales closing 
dates will be January 31. This means that there are locations where 
FCIC cannot change the sales closing dates to make the number of days 
between sales closing and planting more consistent. No change has been 
made.
    Comment: A few commenters stated they disagree with the proposed 
elimination of revenue protection to the producers of sunflowers, 
canola, rapeseed, and corn silage. If market and/or agronomic decisions 
suggest producers should produce these crops, Federal crop insurance 
should not create a disincentive. They urged FCIC to provide revenue 
protection for these crops in the final rule.
    Response: There was never an intent to provide a disincentive to 
produce a particular crop. However, FCIC has an obligation to ensure 
that the revenue prices reflect the market price as accurately as 
possible. To determine the revenue price, these products rely on 
commodity exchange prices for the crop or methodology based on a 
commodity exchange price for another crop that would produce a price 
that closely reflects the market price. There is no commodity exchange 
price for the crop or methodology based on a commodity exchange price 
for another crop that has proven to reflect the price of corn silage. 
Therefore, there is no basis upon which to offer protection against a 
change in price for corn silage. With respect to canola, there is a 
commodity exchange price for canola so coverage against a change in 
price will still be offered. With respect to rapeseed, there is no 
commodity exchange price available for rapeseed and the methodology 
previously used based on the canola commodity exchange price has proven 
to no longer be adequate in reflecting the market price for rapeseed. 
Additionally, commenters have provided suggested methodologies to be 
used to reflect the market price for sunflowers and FCIC has studied 
these methodologies. FCIC has determined that there is a sunflower 
pricing methodology that can reflect the market price for sunflowers so 
protection against a change in price can be offered. Even though 
protection against a change in price is not available for rapeseed and 
corn silage, they may be insured under revenue protection in order to 
preserve the existing whole-farm units currently available under RA.
    Comment: A commenter stated they are not sure how the Texas citrus 
tree and Texas citrus fruit policies are classified (i.e., yield policy 
or revenue policy) and, therefore, are concerned how these policies may 
be affected by the amended Common Crop Insurance Policy even though 
these policies may not be the primary target for the changes.
    Response: The revenue protection discussed in the proposed rule 
will only be applicable to the crops that previously had CRC, IP, IIP, 
or RA coverage. Texas citrus trees and Texas citrus fruit were not 
included in any of these plans of insurance. Therefore, Texas citrus 
trees and Texas citrus fruit will not be affected by the revenue 
protection or yield protection provisions. However, Texas citrus trees 
and Texas citrus fruit will be affected by other applicable changes in 
the Common Crop Insurance Policy Basic Provisions.
    Comment: A commenter cautioned that the Crop Insurance Handbook and 
the Loss Adjustment Manual will interpret the new policy language and 
write them into rules to which Standard Reinsurance Agreement holders 
have to adhere. The commenter stated it is vital the proposed policy 
enhancements for simplification, integrity and efficiency are carried 
over into both the Crop Insurance Handbook and Loss Adjustment Manual. 
The commenter stated these improvements cannot be lost in the 
interpretation.
    Response: One purpose of the changes is to simplify the program. 
This should be reflected in the reduction in the number of underwriting 
rules needed to administer the program. The appropriate procedural 
documents will be revised as necessary to reflect the changes made in 
the policy provisions.
    Comment: A commenter recommended extending the sales closing date 
from March 15th to March 30th to give them more time to sell the 
product with accurate prices/rates.
    Response: FCIC cannot extend the sales closing date to March 30. 
Section 508(f)(2) of the Act requires sales closing dates to be 
established 30 days earlier than the applicable sales closing date for 
the 1994 crop year. The current March 15 sales closing date was 
previously April 15 in 1994. Therefore, no change can be made.
    Comment: A few commenters stated they greatly appreciated the 
agency's extension of the comment period for the proposed rule to allow 
more time to study the provisions.
    Response: The extended comment period served its purpose in 
providing the public additional time to study the provisions and offer 
comments.
    Comment: A few commenters stated they believe the issues are 
significant enough to warrant an interim final rule rather than a final 
rule.
    Response: Even though the issues may be significant, they did not 
require such major changes to the proposed rule to warrant the 
necessity for an interim final rule. The public was afforded additional 
time to comment and FCIC has considered all of the comments and made 
appropriate revisions in accordance with the recommendations.
    As stated more fully below, there were many comments recommending 
changes to provisions where no changes were proposed. Since changes 
were not proposed, the public was not afforded an opportunity to 
comment. FCIC considered addressing those comments that may not be 
substantive in nature but this was too subjective because there may be 
disagreement with respect to what is considered substantive. Therefore, 
as a general rule, these recommended changes were not considered unless 
they were addressing conflicting provisions or program integrity 
issues.

The Application and Policy

    Comment: A few commenters stated it appears coverage equivalent to 
the producer's current coverage will be provided to the producer 
without having to get a new signature from the producer, when the 
current programs are rolled into the Basic Provisions and applicable 
Crop Provisions. The commenters stated that, though this process will 
not be without pitfalls, not requiring a cancel and rewrite of all 
revenue policies should help provide a seamless transition to the new 
provisions. The commenters were supportive of this proposal as it will

[[Page 15784]]

help in administering the conversion of all carryover policyholders to 
the Basic Provisions and applicable Crop Provisions. Another commenter 
stated they were interested in the details underlying this process (for 
example, the revisions to plans of insurance, insurance choices, and 
premium calculations).
    Response: Given the number of policies affected by this rule, it 
was impractical to require cancellation and rewriting of all of these 
policies. It will be imperative that agents explain the affects of 
these changes to the policyholder and assist them in their selection of 
the most appropriate risk management tool. However, without the 
additional paperwork burden, agents should have more time to fulfill 
these responsibilities. FCIC will release the details of the transition 
process and any other necessary information in time to allow insurance 
providers to take appropriate actions.

Section 1 Definitions

    Comment: A commenter stated the definition of ``acreage reporting 
date'' was not proposed to be revised but it would read better by 
either putting the phrase ``contained in the Special Provisions or as 
provided in section 6'' in parentheses or rearranging as ``The date by 
which you are required to submit your acreage report, and which is 
contained * * *''
    Response: Since no change to this definition was proposed and the 
public was not provided an opportunity to comment, the recommendation 
cannot be incorporated in the final rule. No change has been made.
    Comment: A few commenters suggested adding something in the 
definition of ``actual yield'' about the possibility of actual yields 
being reduced (or adjusted) instead of in the definition of ``average 
yield'' (and elsewhere as well). The commenters suggested two 
possibilities for consideration: (1) Add language to the end of the 
first sentence so it reads something like ``The yield per acre for a 
crop year calculated from the production records or claims for 
indemnities and reduced [or ``adjusted'' if this refers to anything 
besides the maximum yield edits] if required * * *''; and (2) Add a 
sentence at the end such as ``* * * Actual yields may be reduced as 
required * * *''
    Response: The producer's actual yield is and should be the yield 
per acre for a crop year calculated from the production records or a 
claim for indemnity and determined by dividing the producer's total 
production by planted acres. The producer's yield would not be an 
actual yield if it were adjusted. No change has been made.
    Comment: A few commenters recommended FCIC consider whether the 
term and/or definition of ``actuarial documents'' should be revised 
since the intended implementation of eWA will result in actuarial 
``information'' (rather than ``documents'') being made available on the 
RMA Web site. A commenter also questioned whether the ``actuarial 
documents'' include the Special Provisions, or just everything else.
    Response: FCIC believes the defined term of ``actuarial documents'' 
will still be appropriate with the implementation of a new information 
technology system because even though the actuarial information will be 
filed electronically on RMA's Web site, the information still can be 
printed out as a hard-copy document. The definition of ``actuarial 
documents'' contains information that is found in the Special 
Provisions. However, because the Special Provisions contain the terms 
and conditions of insurance, it is provided to the insured with the 
Common Crop Insurance Policy Basic Provisions and Crop Provisions. No 
change has been made.
    Comment: A commenter stated the existing, unrevised definition of 
``administrative fee'' reads as though one fee applies to both levels 
of coverage, or possibly even that one fee serves to provide both 
catastrophic risk protection (CAT) and buy-up coverage on the same 
crop/county. They suggested revising this definition to read: ``The 
applicable amount you must pay for either catastrophic risk protection 
or additional coverage * * *'' At a minimum, ``and'' should be changed 
to ``or.''
    Response: Since no change to this definition was proposed and the 
public was not provided an opportunity to comment, the recommendation 
cannot be incorporated in the final rule. No change has been made.
    Comment: Several comments were received regarding the definition of 
``agricultural experts.'' A commenter stated FCIC defines 
``agricultural experts'' to include ``other persons approved by FCIC'', 
however, the Basic Provisions do not indicate how an insurance provider 
may learn the identity of such experts. The commenter believed FCIC has 
an obligation to inform the public of the persons who qualify as 
experts and should amend the definition of ``agricultural experts'' to 
state: ``A list of the agricultural experts approved by FCIC is 
published on RMA's Website.'' A commenter requested that FCIC identify 
guidelines they will use to determine who is an approved agricultural 
expert and the process by which an individual will become an FCIC 
approved agricultural expert. The commenter stated guidelines do not 
belong within the Basic Provisions, but insurance providers, agents, 
and insureds have a right to know the standards and guidelines used to 
determine who an agricultural expert is and the process by which they 
are determined. A commenter disagreed with using the Cooperative 
Extension System in the definition of ``agricultural experts.'' The 
commenter also suggested the RMA Regional Offices (ROs) put together a 
list of agricultural experts that can be used as a resource. The 
commenter stated that, according to the recent Good Farming Practices 
Bulletin, there is a need in the field for unbiased and experienced 
resources. A few commenters stated they believe Certified Crop Advisers 
(CCAs) should also be included in the definition of ``agricultural 
experts'' given their required training and expertise and their 
widespread use in the field. A commenter stated the definition of 
``agricultural experts'' should be expanded to read as follows: 
``Persons who are employed by the Cooperative Extension System or 
agricultural departments at universities; persons approved by FCIC, 
whose research or occupation is related to the specific crop or 
practice for which such expertise is sought; and other persons, whether 
or not approved by FCIC, whose research or occupation is related to the 
specific crop or practice for which such expertise is sought and whose 
experience is equivalent to persons approved by FCIC.'' The proposed 
revision recognizes there may be persons with recognized expertise in 
addition to employees of the Cooperative Extension System and 
agricultural departments in universities, as well as any persons 
approved by FCIC. The proposed revision also is desirable because it 
gives insurance providers the option of consulting with and utilizing 
the skills of persons in addition to those set forth in the definition 
as written. When time is critical, having this option would be 
important.
    Response: FCIC has developed procedures that can be used to 
determine who qualifies as agricultural experts in Manager's Bulletin 
MGR-05-010. Insurance providers and producers can use these procedures 
in selecting their experts. However, it is not practical to list all 
FCIC approved ``agricultural experts'' on RMA's Web site or for the ROs 
to maintain such a

[[Page 15785]]

listing because it would be impossible to list the name of every 
potential agricultural expert and it would be impossible to keep it up-
to-date. In MGR-05-010, agricultural experts are not listed by name but 
by categories of people who are currently approved by FCIC to be 
agricultural experts. Any person who falls within the category is 
considered approved by FCIC. CCAs are included as a category of experts 
approved by FCIC. There is no basis to exclude Cooperative Extension 
System from categories of approved agricultural experts. These persons 
have experience in the production of the crop in the area. The phrase 
``whether or not approved by FCIC'' should not be included in the 
definition. There must be a clear standard set for who qualifies as an 
agricultural expert and FCIC has established that through MGR-05-010. 
If insurance providers or producers know of other persons that should 
qualify as agricultural experts but they are not included in one of the 
listed categories, they may submit the person's name to FCIC for 
approval. If approved, FCIC will include the category of such person in 
the Bulletin. No change has been made.
    Comment: A commenter stated the third sentence in the definition of 
``application'' is problematic. As worded, it suggests that any time a 
policy is canceled or terminated, ``* * * a new application must be 
filed for the crop.'' Certainly, this is true if the producer is 
willing and eligible to reinstate the canceled/terminated coverage, but 
not if the application would be unacceptable because the entity is 
ineligible.
    Response: New applications must always be made after a policy has 
been canceled or terminated. The insurance provider should not accept 
the application if the applicant is ineligible. No change has been 
made.
    Comment: A commenter stated the definition of ``approved yield'' is 
not revised in the proposed rule but requested FCIC to see their 
comments to the definitions of ``actual yield'' and ``average yield'' 
regarding the term ``actual yield.''
    Response: Since no change to this definition was proposed and the 
public was not provided an opportunity to comment, the recommendation 
cannot be incorporated in the final rule. No change has been made.
    Comment: A few comments were received regarding the definition of 
``assignment of indemnity.'' A commenter questioned the meaning of the 
term ``legitimate'' and whether FCIC intends on setting forth the 
standards by which an insurance provider is to determine whether an 
assignment of indemnity is legitimate. The commenter stated it is 
noteworthy that section 29, entitled ``Assignment of Indemnity,'' does 
not employ the term ``legitimate.'' The commenter stated FCIC must 
provide additional guidance in this regard. Another commenter opposed 
FCIC's proposal that would restrict a producer's ability to assign an 
indemnity to a third party other than ``legitimate creditors.'' The 
commenter stated their opposition is based on the fact that some 
companies have worked to create programs that directly incorporate crop 
insurance and marketing plans into one comprehensive program. For 
example, their company has worked with their grain division to create a 
cash grain contract that guarantees a producer a dollar per acre 
amount. It is a ``production contract'' as opposed to a typical 
``bushel'' contract. The producer can sell the total production to the 
elevator at a guaranteed minimum (dollar/acre) and maintain the upside 
on price. This instrument is very sophisticated. It involves over-the-
counter options, the assignment of indemnity to the elevator, and a 
cash delivery obligation of the producer. FCIC's educational efforts 
encourage these sorts of integrated programs. The private marketplace 
has responded by creating them. The commenter stated they will not work 
without an assignment of indemnity and they encourage FCIC to 
reconsider this change.
    Response: FCIC agrees it may be difficult for an insurance provider 
to determine if a creditor is legitimate. Therefore, FCIC has removed 
the word ``legitimate'' and instead has specified the producer may 
assign his or her right to an indemnity for the crop year only to 
creditors or other persons to whom the producer has a financial debt or 
other pecuniary obligation. The insurance provider will have the 
ability to request that the producer show proof of the debt or 
pecuniary obligation before accepting the assignment of indemnity. FCIC 
also agrees assignments used in pricing/delivery agreements should be 
allowed. Such agreements would be considered ``pecuniary obligations.''
    Comment: A few comments were received regarding the definition of 
``average yield.'' A commenter stated the definition is confusing and 
needs to be clarified. The commenter noted the definition states ``* * 
* including actual yields reduced * * *'', and later states ``* * * 
prior to any yield adjustments.'' Another commenter suggested instead 
of adding the phrase ``* * * (including actual yields reduced in 
accordance with the policy) * * *'' to ``clarify the reference to 
actual yields'', they suggested revising the definition of ``actual 
yield.'' Otherwise, the commenter believes it would be necessary to add 
a similar phrase in the definition of ``approved yield'' and in other 
references to actual yields throughout the policy provisions. A 
commenter suggested the remainder of the phrase proposed in the 
``average yield'' definition, ``* * * in accordance with the policy,'' 
needs to be reconsidered. The commenter stated the maximum yield 
procedure does not appear to be addressed in the Basic Provisions. The 
commenter added since the Basic Provisions are part of the ``policy'' 
any reference should be to the specific provisions, or to the procedure 
(which might be preferable instead of including detailed procedures in 
the policy that cannot easily be revised if and as needed).
    Response: FCIC agrees the definition may be confusing and has 
revised it by removing references to ``adjusted yields'' (except 
adjusted transitional yields) and ``actual yields adjusted in 
accordance with the policy.'' The revised definition includes actual 
yields, assigned yields in accordance with redesignated sections 
3(f)(1) (failure to submit a production report), 3(h)(1) (excessive 
yields) and 3(i) (second crop without double cropping records for 
prevented planting), and adjusted and unadjusted transitional yields. 
The definition of ``actual yield'' should not be revised because it 
refers to the actual production produced in the unit. As revised, these 
actual yields will become a component of the ``average yield.''
    Comment: A few comments were received regarding the definition of 
``catastrophic risk protection.'' A commenter recommended the first 
sentence in the definition that states ``The minimum level of coverage 
offered by FCIC that is required before you may qualify for certain 
other USDA program benefits'' be verified with the Farm Service Agency 
(FSA). The commenter stated he has received information from FSA 
stating the minimum level of coverage required for linkage is one level 
above CAT. A commenter stated catastrophic risk protection is not 
available for revenue protection under the definition of ``catastrophic 
risk protection'', however, under section 523(c)(2)(B) of the Crop 
Insurance Act (Act) it states, ``Revenue insurance under this 
subsection shall offer at least a minimum level of coverage that is an 
alternative to catastrophic crop insurance.'' To date, the commenter is 
unaware of any product offered by FCIC,

[[Page 15786]]

which addresses this provision and the commenter suggested FCIC 
consider this aspect in the Basic Provisions. A commenter stated they 
respectfully oppose the proposed regulations for the simple reason the 
proposed pricing structure creates a disincentive for producers to 
cover their risks by purchasing the least amount of crop insurance 
required to accept Federal disaster assistance. A commenter suggested 
that levels of crop insurance below 65 percent be eliminated from the 
policy. The commenter stated CAT policies in particular require the 
same amount of paperwork and have no real value and many producers with 
lower levels would buy up. A few commenters stated the proposed rule 
allows CAT coverage under yield protection. They requested CAT coverage 
be eliminated, or, at the least, be subject to the same actuarial 
parameters for calculation of premiums to which other coverage levels 
are held. A commenter requested a paper drafted by another person be 
submitted into the record and thoroughly analyzed prior to the adoption 
of the final rule pertaining to the Basic Provisions. A commenter asked 
why there is no revenue coverage available on catastrophic risk 
protection policies. Many producers need the revenue coverage on high 
risk ground, where premiums are too high to be insured on their other 
policy, which may have revenue protection. The commenter asked if there 
has been any thought given to allowing a producer to have revenue 
coverage on a catastrophic risk policy if the companion policy is 
revenue protection.
    Response: FCIC agrees the phrase ``that is required before you may 
qualify for certain other USDA program benefits'' is no longer 
appropriate. Many current FSA programs do not require linkage. Some 
past disaster programs have required crop insurance coverage, however, 
each disaster program stipulates its own criteria and catastrophic risk 
protection may not be the level of coverage required. The definition 
has been revised accordingly. Section 523 of the Act contains 
provisions applicable only to pilot programs and FCIC implemented this 
section when it offered the IP policy. However, the statutory mandate 
in section 523(c) of the Act to require CAT was only for the 1997 
through 2001 crop year. When combining all the revenue products in this 
rule, FCIC declined to include revenue coverage in CAT policies because 
it would provide a disincentive for producers to purchase additional 
levels of coverage. CAT was only intended to be a minimal coverage risk 
management tool and not compete with the additional coverage policies. 
Therefore, as stated in the background section of the proposed rule, 
the definition of ``catastrophic risk protection'' is revised to 
preclude producers who elect revenue protection from obtaining CAT 
coverage because revenue protection is considered an option and CAT 
policies are not eligible for optional coverage. Since the paper 
referenced by the commenter was not submitted to FCIC as a comment to 
this rule, FCIC cannot consider the individual comments or 
recommendations contained in the paper in finalizing this regulation. 
FCIC does not have the authority to eliminate CAT coverage. Such 
coverage is mandated by section 508(b) of the Act and cannot be 
eliminated without a change in the law. Questions remain with respect 
to whether coverage levels less than 65 percent can be eliminated. 
However, since FCIC has not proposed or sought comments on such a 
change, it cannot be considered in this rule.
    Comment: A commenter stated they recommend additional clarification 
for the definition of ``claim for indemnity'' because it is often 
confused with a notice of loss. The commenter stated additional 
language might include ``Additionally, you must provide any documents 
required by the policy to determine the amount of indemnity, including 
but not limited to, harvested production records, crop input records, 
documents needed for verification of reported information, etc., as 
stated in section 14.'' Alternatively, this could be included in 
section 14 rather than the definition.
    Response: Notice of loss is simply a written notice, or an oral 
notice followed up with a written notice, that damage has occurred or 
production has been reduced. A claim for indemnity is a document 
executed by the producer and loss adjuster that contains the 
information necessary to pay the indemnity as specified in the 
applicable procedures. While the claim for indemnity must be supported 
by the production records, etc., as required by section 14, such 
records are not generally transmitted to the insurance provider. FCIC 
will clarify that the claim for indemnity is the document that contains 
t