Independent Insurance Agents of Iowa - Viewpoint Magazine - Spring 2016 by Independent Insurance Agents of Iowa

SPRING 2016 • VOLUME 34 • ISSUE 2 INDEPENDENT INSURANCE AGENTS OF IOWA

Insuring Iowa Agriculture IN THIS ISSUE: Boy Things Are Different Today! Resources Available To Members At Big “I” Markets Critics Continue Their Never Ending Attack On Crop Insurance Workers’ Compensation And The Exemption For Agricultural Labor 2016 IIAI Rural Agents/Small Town Agency Conference Crop Insurance Industry Responds to EWG The Vaughan Institute Of Risk Management and Insurance Revisited After 10 Years The Big “I” Advocacy Is For More Than Just Our Business Interests! Consumers Win Too! Crop Insurance Keeps America Growing

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WEST DES MOINES, IOWA • 800.274.3531 • WWW.IMTINS.COM

PRESIDENT’S REPORT Boy Things Are Different Today!

Independent Insurance Agents of Iowa 4000 Westown Parkway West Des Moines, Iowa 50266 (515) 223-6060 • FAX (515) 222-0610 800-272-9312 (In-State only)

Advertising Editors Melissa Meiners & Nicole Peffers

BOARD OF DIRECTORS President Jerry Mease - Winterset

President-Elect Eldon Hunsicker - Ottumwa

Treasurer Terry Friedman, CPCU - Dubuque

National Director Dean Brooks, CPCU, CLU West Des Moines

Directors

Tim English, CIC - Dyersville John Dalton - Council Bluffs Steve Madsen - Marshalltown David Rowley, CPCU, CIC, AU - Spirit Lake Scott Wirtz - Emmetsburg Luke Horak - Washington Lottie Miller, CPCU, CIC, AAI, CISR, CPIW, AAM, CRIS - Cedar Rapids Chris Gentry - Ollie

Past President Scott Morningstar, CPCU - Lisbon

IIAI OFFICE STAFF Chief Executive Officer Bob Skow, CPCU, CAE bob@iiaiowa.org

Director of Membership Operations & Education Melissa Meiners melissa@iiaiowa.org • Ext. 15

Technology & Communications Coordinator Nicole Peffers nicole@iiaiowa.org • Ext. 17

Membership Services Coordinator Marilyn Paul, CPCU, AIT, AAM, CPIW marilyn@iiaiowa.org • Ext. 11

Membership Services Coordinator Brenda Kluger, CIC, CISR, CIIP, CRM brenda@iiaiowa.org • Ext. 14

Membership Services Coordinator Megan Kincy, AINS, AIS megan@iiaiowa.org • Ext. 16

Office & Education Assistant Cindy Grim cindy@iiaiowa.org • Ext. 12

Farming was much different back when I got started. Most were smaller farms with some good old machinery; everyone had some livestock – hogs, cattle, maybe some sheep, a lot of smaller outbuildings and maybe one large barn. Jerry Mease Page 5

NATIONAL DIRECTOR’S REPORT Resurces Available To Members At Big “I” Markets Check out the Big “I” Markets link where you will find access to a variety of insurance products for your clients, including flood insurance and a wide range of personal and commercial lines offerings. Dean Brooks, CPCU, CLU Page 7

ADVERTISERS We would like to thank our advertisers for their support. This magazine would not be possible without them. THANK YOU! 24 ACUITY 9 Amerisafe

In This Issue Critics Continue Their Never Ending Attack on Crop Insurance By G. “Art” Barnaby, Jr. Page 10

Workers’ Compensation and the Exemption for Agricultural By Roger A. McEowen Page 16

34 Big “I” Professional Liability

2016 IIAI Rural Agents/Small Town Agency Conference Sets Another Attendance Record!

6 BITCO Insurance Companies

Page 18

13 Burns & Wilcox

Crop Insurance Industry Responds to EWG By Tom Zacharias

8 ARM Associated Risk Managers

14 EMC Insurance Co. 28 Grinnell Mutual 2 The IMT Group 4 Iowa Mutual Insurance Co. 23 Merchants Bonding Co. 15 M.J. Kelly Company 23 Partners Mutual Insurance

Page 25

The Vaughan Institute of Risk Management and Insurance Revisited After 10 Years By Dana Ramundt Page 29

21 SFM® The Work Comp Experts

The Big “I” Advocacy is for More Than Just Our Business Interests! Consumers Win Too! By Bob Skow, CPCU, CAE

32 West Bend

Page 33

31 Western National Insurance

Crop Insurance Keeps America Growing

23 Pekin Insurance 27 SECURA Insurance Co.

Page 35

MISSION STATEMENT: The Independent Insurance Agents of Iowa will be an unrelenting advocate of the business, professional and p olitical interests of its members; doing so by working in the p ublic’s best interest and with the highest e thical standards. Viewpoint is a publication of the Independent Insurance Agents of Iowa. Viewpoint is published quarterly: Winter, Spring, Summer and Fall. Viewpoint is mailed to Iowa insurance agents, Iowa Home Office Executives, Affiliate members, and other state associations and organizations.

president’s REPORT

Boy Things Are Different

TODAY! by Jerry Mease

started life, until I was 10 years old, growing up on a farm. I loved the farm and the chores I was able to do at that age. So, it was natural I guess for me later in life to enjoy working with farmers solving their risk management needs. When I started in the insurance business we managed a small county mutual which dealt primarily with the farmers in our county, along with being an agent. Frankly, it was a good learning experience, because we did it all - the underwriting, risk inspection and claim service. Farming was much different back when I got started. Most were smaller farms with some good old machinery; everyone had some livestock – hogs, cattle, maybe some sheep, a lot of smaller outbuildings and maybe one large barn. Few specialized like they do today, and an expensive tractor or combine was worth $20,000. I think I am safe to say writing farm related insurance back then was pretty easy. Coverages were basic so all you needed to do was keep track of inventories, look at a few simple out buildings and you were pretty much done with the property side. Farm liability was hard to sell in the beginning in my early days. Hard to imagine now that many farmers saw little need to be protected against someone suing them, lone enough ever think that they

each fall and you had to start the process over the next year. Boy things are different today! To be a good farm agent today you almost have to specialize in that market. Risk management has taken on so many different complexities – crop insurance coverage choices, contract feeding of livestock for someone else, hired help with workers’ compensation, millions in assets, large concentration of buildings, equipment and livestock. Today’s farm risk is much more like a sophisticated commercial account. The size and value of farms today make liability and umbrella coverage the most important part of their might get sued by a community water coverage. Add farm trucks, large farm system. Things were simpler, premiequipment on roads, ATV’s, pollution ums were much and nuisance exposmaller, and more sures and it is safe “Farming was much different like personal lines to say that today’s back when I got started. Most were accounts than farming is big smaller farms with some good commercial. business. old machinery; everyone had When Federal The old tradisome livestock – hogs, cattle, Crop Insurance tional outbuildings maybe some sheep, a lot of was turned over are almost all smaller outbuildings and maybe to independent gone or obsolete. agents I was eager Modern equipone large barn” to sign up. Again, ment has changed it was so easy to dramatically with write back then. Only a few choices of computerization and computer mapcoverage were available. When the ping. Most of the livestock is now in weather was dry in the spring it sold hard to write confinement buildings well. The only problem was in those with large values in unprotected fire early days most farmers would cancel class codes. The crop insurance with

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some 300 options is enough to keep any agent awake at night. How imperative it is today to keep abreast of the changing needs, changing coverages, and keep a constant connection with our farm clients. This year during the Annual IIAI Rural Agents and Small Town Agency Conference, it hit me how complicated writing farm risks has gotten during the span of my career. It also occurred to me the significant amount of premium dollars that are involved in rural Iowa. While we may have fewer farms to insure, the ones we do are so much larger and generate so much more premium that they did 40 years ago. I truly admire the people that choose a farming profession. With the amount of labor that is involved, and the risks they take, you can’t help but want to see them succeed. After all that risk and worry someone else tells them what their product is worth. One of our goals as your Association is to help you market this business. We keep you as up-to-date as possible

to protect you as best we can from the hazards that are put before you. Also, we provide you with insurance education opportunities and assistance in understanding the changing laws and update you on all evolving insurance coverages. The Big “I” is watching the legislative process at both the Federal and State level; fighting battles that are not only in the best interest of agents, but

candidly our clients. None is a better example over the last few years than our fights to preserve the crop insurance program. My dad used to say – “as agriculture goes so does Iowa” I believe that is so true. I know it is true for many of our members who generate a significant part of their book of business from insuring agriculture risks.

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national director’s REPORT

Resources Available To Members At

BIG “I” MARKETS by Dean Brooks, CPCU, CLU

f you haven’t done so recently, you owe it to yourself to visit the national Big “I” website (www.iiaba.org) and explore all the resources available to members. While the three primary activities of the Association — lobbying, education and the E&O program — are of critical importance to all members, there also are many other member benefits offered by IIABA. Check out the Big “I” Markets link where you will find access to a variety of insurance products for your clients, including flood insurance and a wide range of personal and commercial lines offerings. Here are just a few: ➤ Contract Bonds ➤ Cyber Liability ➤ Employment Practices Liability (EPLI) ➤ Outdoor markets for hunting and fishing lodges, outfitters, rod and gun clubs ➤ International Markets ➤ Affluent Personal Lines Package (ACE, Chubb, Fireman’s Fund) ➤ Non-Standard Homeowners and Rental Coverages ➤ Stand-alone Personal Umbrella ➤ Excess Flood for both Personal and Commercial clients ➤ Vacant Property ➤ Environmental Impairment (pollution) Coverage These are just a sampling of what is

available through Big “I” Markets. It’s easy to get a quote for whatever you need. There is no minimum production requirement and you receive a competitive commission. Another newer member benefit is the “First Monday” webcast brought to you via Virtual University. Bill Wilson, IIABA Director of Education, connects with other industry leaders to present programs on current industry trends and issues. For example, a recent webcast discussed evolving drone regulation and insurance coverage or lack thereof. Virtual University also offers other educational webinars on a regular basis. Finally, don’t forget the “Ask An Expert” service provided free to mem-

bers. If you have a coverage question or an agency management question, you can send it to the AAE service and get an answer from a panel of experts, usually within 24 hours. There are a few qualifiers, such as no questions on claims in litigation, but these are relatively few and are spelled out in the AAE tab. Moving on to an Iowa-specific topic, much of this issue of Viewpoint is devoted to agriculture issues. I’ve watched with interest the public debate regarding the proposed Bakken pipeline across Iowa. One of the important considerations that appears to be getting less attention than it should is the significant and potentially catastrophic pollution liability exposure for landowners who grant easements for the pipeline. A number of months ago I did some pro-bono consulting for an attorney representing a group of landowners in northwest Iowa. This involved both a review of the easement agreements (there are several) and the insurance coverage purportedly in place for Dakota Access, LLC. While I can’t go into detail, there are a few very general observations regarding landowner exposure to loss and insurance I can make, including a couple of opinions you can take for what they’re worth — remember this is pro-bono work. The easements are in perpetuity,

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which by any objective standard is a long time. Also, the landowner retains ownership in the strip of land to which access is given in the easement. This means the landowner has a potential pollution liability exposure arising from the pipeline in perpetuity. While there obviously are liability exposures for landowners during the construction phase, this exposure can be fairly easily quantified and properly managed via a combination of contractual transfer and insurance. Of more concern to me is the possibility of a pollution incident years from now. The landowners could suffer financial loss due to damage to land and crops (first party), damage to property of others and/or bodily injury (third party) and finally for government mandated clean-up. Think in combination of pipe leak, tiled fields, drainage ditches and streams leading into major rivers in our drainage basins. What coverage would landowners have for this exposure under their own

policies? Likely none, as virtually all necessary. insurance policies contain a very broad Hopefully, landowners have thought pollution exclusion which, among other through and evaluated potential things, excludes coverage for BI or exposure to loss caused by granting PD or government mandated clean-up an easement for both the construcarising out seeption of a pipeline age or migration of on their property “While I can’t go into detail, there are pollutants at or from and the continuing a few very general observations any premise which existence of the regarding landowner exposure to is or was at any pipeline in perloss and insurance I can make, time owned by any petuity on their including a couple of opinions you insured. Granted, property. It would can take for what they’re worth — there can be a conalso be important remember this is pro-bono work” tractual transfer of for landowners to the exposure to the seek advice from pipeline company attorneys knowlbut this relies on edgeable in several assumptions, including that the property law. And a final reminder: pipeline company is still in existence or remember, it is not the responsibility a successor entity has assumed their of an insurance agent to review legal obligations, that they have the easements or other legal documents proper insurance coverages in place for clients. After they visit with for first party, third party and clean-up their attorney, they can talk to you claims at time of loss, and they have about insurance coverage if they the financial wherewithal to back up so desire. contractual assumptions of liability if

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Critics Continue Their Never Ending A response to comments made by critics of Federal Crop Insurance By: G. “Art” Barnaby, Jr., Ph.D. Professor & Extension State Leader; Ag Economics Department of Ag. Economics Kansas State University

merican Enterprise Institute’s (AEI) DC conference held a conference in Washington, DC on Wednesday, February 10, 2016, hosted by Vince Smith, Montana State University, and included Bruce Babcock, Iowa State University, Joseph Glauber, International Food Policy Research Institute, Barry Goodwin, North Carolina State University and, Daniel Sumner, University of California, Davis. If you go to the link below, you can watch the AEI’s video presentation by the panel. https://www.aei.org/events/the2014-farm-bill-a-midterm-review/ The only surprise among the presenters at AEI’s conference was Dr. Babcock. In the past, Babcock has argued for the Farm Service Agency (FSA) to administer a “free” disaster program that would replace private sector delivered crop insurance. Babcock’s past arguments for an FSA-provided safety net really do not fit the AEI agenda. The others members of the AEI panel have always argued for a “free market” in their writings, so they fit AEI’s agenda. At the bottom is a selected list of papers that either cite or are authored by panel members.

Comments on the AEI’s Conference Free Market Requirements: If one follows the argument to replace current policy with a “free market” policy, it would

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require the elimination of FSA, Risk Management Agency (RMA), and the Experiment Station-Extension Service. Those agencies all provide “subsidies” to farmers, following libertarian philosophy. Regardless of U.S. policy, it is likely America’s grain farmers will always have to deal with foreign governments messing with the market. This does not meet the definition of a “free market”, but if policymakers were to eliminate the safety net, then U.S. agriculture would have to figure out methods for dealing with the added risk. Goodwin does suggest farmers might use futures and options to manage risk, but conveniently omits that all of those tools assume farmers will have bushels to offset their Board position. Renewal Protection (RP) guarantees those insured bushels at their current replacement value and will maintain the hedge. Many economist would agree with Goodwin’s statement that if U.S. policy is going to support a crop insurance program, then it shouldn’t discriminate against large farmers. The larger insurance pool and spreading of overhead costs are benefits generated by a large pool of insureds. Only in recent years has RMA managed to meet the Congressional mandate requiring a 1.0 loss ratio and that is the direct result of much larger participation and rate adjustments. Goodwin, Smith, and Sumner are correct that if USDA

Attack On Crop Insurance

were closed, Iowa will still be planted to corn and Kansas will be planted to wheat. Even if there are foreign governments interfering in the market, those acres will still be planted. But does anyone think there is any chance that Congress will lay-off all of those USDA employees at RMA and FSA? That Infrastructure has to go before any farmer would be willing to even consider paying higher private rates for crop insurance. If the RMA and FSA infrastructure were left in place, then with the first disaster, a new Congress could easily provide ad hoc disaster aid. Even if the policy is a “free market”, most farmers will still have the expectation of ad hoc disaster aid if most farmers are uninsured. Free market means un-insured farmers have to go broke if they suffer enough crop failures. That was supposed to be the policy in the 1980’s, but ad hoc disaster aid was still provided. The 2012 Corn Belt drought was the first major crop failure when Congress didn’t provide any ad hoc disaster payments to crop farmers (Congress did provide disaster payments for livestock producers). Crop Insurance is a lottery? In a just released paper, Babcock argues crop insurance is a lottery in a new paper titled “Crop Insurance, A Lottery That’s A Sure Bet” (Environmental Working Group”, www.EWG.org, 1436 U Street N.W., Suite 100, Washington, D.C. 20009, February 2016).

Babcock states that crop insurance is just passing money to farmers and it is not risk management. His proof is that when prices are high, payments are high. But often prices are high because a large number of farmers had a crop failure, and farmers who have nothing to sell are hurt by high prices, especially under the new Title 1 programs where high prices will eliminate FSA payments to farmers. Risk Management: Revenue Protection that has the HPO included in the coverage provides risk management at the farm level. Once farmers plant corn they are long in the market! Farmers can’t store the crop forever, they will have to sell it. Some corn farmers will market their crop by feeding it to dairy cows, hogs, feeder cattle, etc. Other ways farmers market their corn include cash forward contracts, hedge to arrive, minimum price contracts, deliver corn to a warehouse or processor for a deferred price contract, futures hedge, buy puts, cover cash contracts with calls, buy putssell calls, store the grain at the elevator or on-farm for later sale, sell corn at harvest for cash straight off the combine, etc. All of these marketing strategies assume there will be corn to offset the long position created by planting the crop. Most farmers and their lenders would agree this is risk management and not a lottery as claimed by Babcock. Babcock is correct: payments are higher when prices are higher. The reason is that when a large number of farm-

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ers have a crop failure, prices often increase. RP replaces the bushels, less the deductible, at the crop’s current value. RP guarantees bushels and that maintains the “hedge” even for farmers selling cash grain straight off of the combine. At the farm level, higher prices are of no help if the crop fails because there is little or nothing to sell at the higher prices and maybe they’re an increased detriment if farmers have to fill forward contracts or replace a feed supply. Farmers demand less coverage when they pay premiums: Experts have stated that the purchase of Stacked Income Protection Plan (STAX) for Upland Cotton was low because cotton farmers had to pay a share of the premium (subsidy to this group economists). If ARC or PLC had required farmers to pay 20% of the “premium” cost, then likely those products also would only have had a 20% participation rate, similar to STAX. ARC is effectively “free” area triggered revenue insurance and PLC is a “free” put, and when free, farmers always want the maximum coverage. In Kansas most farmers to do not buy crop insurance at the maximum 85% coverage, as most are at 70% or 75% coverage because of the “large” farmer-paid premium cost. If it were free, Kansas farmers would want the maximum coverage. As a result, most of the 80% and 85% coverage is sold in the Corn Belt where the farmer-paid premiums are lower because the risk is lower. Economists like county based crop insurance better than farmers: Farmers don’t fully trust how the county yield is determined, but more importantly, a farm loss may not be reflected in the county loss. In the aggregate, STAX will likely pay over the 5 years of the current Farm Bill, but it may not pay in one’s county during the short life of the Farm Bill. The limitation of yields on a county-triggered payment program can be demonstrated by an example. Clark County, Kansas wheat is a good example of yield

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impacts on ARC and why things look different at the farm level than they do using macro numbers. The recent seven year county yields were 2009 = 32; 2010 = 38; 2011 = 22; 2012 = 24; 2013 = 22; 2014 = 22; and 2015 = 41. The 2015 county yield was published by NASS but FSA might adjust it before final payment, if any. The first two yields are good ones followed by four straight years of county yields below or near the T-yield plug of 22 bushels. The 2009 and 2010 yields will drop out of the Olympic average yield for the 2016/17 marketing year yield and the 41 bushels in 2015 drops out of the Olympic average due to it being the high yield during the five years. The resulting Olympic average yields marketing year 2014/15 = 26 bushels; 2015/16 = 23 bushels; and 2016/17 = 23 bushels. Because of the low benchmark yield and even with the historically high $6.70 wheat price, it will only require a normal wheat crop (about 27 bushel) yield this summer to eliminate the ARC payment. Crop insurance will be the major safety net for these Clark County wheat farmers because it is individual coverage and some farmers may have excluded some of those low yield years from their history. Crop insurance covers all acres, including non-base acres, rather than just 85% of the base acres for ARC. Budget Cuts: This panel will dismiss the argument from the crop insurance industry that crop insurance has already taken cuts. Even if one assumes that the crop insurance industry has taken cuts, this argument is not about budget. With the exception of Babcock, this group is arguing to eliminate the safety net. Babcock has argued for the elimination of the HPO, or at least to eliminate the government’s share of the premium for HPO. If budget were the issue, then Congress could change the subsidy levels by 5 points on all crop insurance contracts, including CAT that has 100% of its premium paid by USDA. For example, farmers at 85% cover-

age would have the USDA premium paid share reduced from 38% of the premium to 33%. CAT buyers would be required to pay 5% of the premium whose current CAT premium is 100% taxpayer funded. If all farmers were required to pay 5 points more of the premium, it would generate large savings. Likely there would be some reduction in participation, but more likely some farmers would drop back a coverage level and not exit the program. However, it is likely some CAT buyers would drop their coverage even though they would only pay 5% of the premium. If one were to apply this same principle to Title 1 programs and require farmers to pay 20% of the premium for ARC and PLC, similar to STAX on cotton, then likely there would also be a large drop in participation for many crops. A 5 point across-the-board increase in the share of the premium paid by farmers would hurt everyone a little. However, the agenda for many of the experts who want to eliminate the HPO is to change the structure of the crop insurance program. In their expert opinion, they argue farmers don’t “need” the HPO. But farmers continue to pay higher premiums to buy the HPO. They reject the market result and claim HPO is not needed, but farmers buy it because their crop insurance agent tells them to buy it, or they buy because they want to capture more subsidy. This author is not arguing for a budget cut, but my argument is that this is not about budget. It is simply a group of economists that want to fundamentally change the crop insurance program or eliminate the crop insurance program. AEI funding: The American Enterprise Institute (AEI) receives funding from several conservative groups. Normally both conservative and liberal think tanks don’t provide a list of their givers. Thus, much of the information comes from the press, which may not always be correct. Below is a list of web-stories about AEI’s funding. Continued on page 15 ➤

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Selected list of papers that cite or are authored by the AEI panel 1. Sumner is cited in multiple places in a book chapter titled “Brazil’s WTO Cotton Case: Negotiation Through Litigation”, J. Katherine Milligan and Ray Goldberg, Harvard Business School and Robert Z. Lawrence, John F. Kennedy School of Government, Harvard Business School Publishing. http://www.petersoninstitute.org/ publications/chapters_preview/ 3632/05iie3632.pdf In footnote 11 on page 243, it is argued that Sumner carried the day for Brazil’s cotton case, because FAPRI’s simulation analysis was tossed out of court. USDA could not duplicate FAPRI’s

results and FAPRI would not release their parameters. 2. Babcock appears to have done the simulation analysis for Brazil’s WTO cotton case after FAPRI’s results were rejected by the court. Babcock made the disclosure of his work for Brazil in the following paper. Bruce

A. Babcock, “Cheap Food and Farm Subsidies: Policy Impacts of a Mythical Connection”, Center Agricultural and Rural Development (CARD,) Iowa Ag Review, Spring 2006, Vol. 12 No. 2, babcock@iastate.edu, 515-294-6785 “Note of Disclosure: Professor Babcock was an expert witness testifying for a major Canadian corn importer in the inquiry by the Canadian International Trade Tribunal. In addition, he provided modeling assistance in 2003 to Professor Daniel Sumner, who was an expert witness for Brazil in the cotton case.” file:///C:/Z%20Drive/ WORK%20FILE%20NEW/card.pdf 3. Sumner’s presentation to the WTO cotton dispute panel in September 2003 is at https:// www.ncsu.edu/project/ arepublication/Effects_US_ Cotton_Subsidies.pdf In the footnote on the title page of the testimony for Brazil’s cotton case titled “THE IMPACTS

OF U.S. COTTON SUBSIDIES ON COTTON PRICES AND QUANTITIES: SIMULATION ANALYSIS FOR THE WTO DISPUTE” it includes all of the authors: Daniel A. Sumner is the Director of the University of California Agricultural Issues Center and the Frank H. Buck, Jr. Chair Professor in the Department of Agricultural and Resource Economics at the University of California, Davis. The simulation analysis was developed and conducted jointly with Bruce A. Babcock and Jacinto F. Fabiosa at CARD, Iowa State University. The core of this manuscript is a condensed and edited version of Annex I presented to the WTO cotton dispute panel in September 2003. 4. Barry K. Goodwin, Ardian Harri, Roderick M. Rejesus, and Keith H. Coble, Sumaria Systems, Inc., “Actuarial Review for Price Volatility Factor Methodology Responses to Review Comments”, 12/27/2014.

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WORKERS’ COMPENSATION AND THE EXEMPTION FOR AGRICULTURAL LABOR Roger A. McEowen

Appeals, however, held that the exemption for certain types of agricultural employment from state workers’ compensation statutes was unconstitutional. The court’s opinion, which is likely to be reviewed by the New Mexico Supreme Court, is contrary to the outcome of similar cases in other states. But, the New Mexico court’s opinion does illustrate another tough legal issue associated with the increasing commercialization of the traditional family farm. In any event, farm employers should carefully review state workers’ compensation law as it might apply to their operation and determine whether it is more advisable to opt in to coverage under the system or rely on any exemption for agricultural employment that state law might provide.

Workers’ Compensation (In General) Overview Agricultural law is often “law by the exception.” For a variety of reasons, the law views many aspects of agricultural production as significantly different from other industrial enterprises. As a consequence, in such situations general legal rules have been deemed inappropriate as applied to agriculture. One area of the law, for example, involves farm employment situations. Farm employers are not subject to many federal labor laws and, in many states, are not included within the scope of the state workers’ compensation provisions. A recent opinion of the New Mexico Court of

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Under a workers’ compensation system an employee is entitled to a guaranteed compensation for work-related injuries, regardless of fault. The amount of compensation is a set statutory amount. The employer pays for the cost of participating in the system through the payment of insurance premiums. Once the employment situation is in the system, the employee cannot bring any type of legal claim against the employer related to injuries sustained on the job.

Exemption for Agricultural Activities Presently, 16 states have some sort of exemption for “farm” or “agricultural” labor from workers’ compensation coverage.[1] The historic reasons for the exemption are couched in administrative ease and economics – that it would be

[1] Those states are Alabama, Arkansas, Delaware, Georgia, Indiana, Kansas, Kentucky, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Dakota, South Carolina, Tennessee and Texas. [2] See, e.g., Haney v. North Dakota Workers Comp. Bureau, 518 N.W.2d 195 (N.D. 1994). But, other courts have disagreed with this rationale. See, e.g., Macias v. Department of Labor & Indus., 100 Wash. 2d 263, 668 P.2d 1278 (1983). [3] See, e.g., Winglovitz v. Agway, Inc., 667 N.Y.S.2d 509 (N.Y. App. Div. 1998). [4] The Iowa statute exempts from coverage agricultural employees where the employer has a cash payroll of less than $2,500 in the calendar year preceding the injury. [5] In Iowa, workers’ compensation is not required for the president, vice president, secretary or treasurer of a family farm corporation and their spouses, and the parents, brothers, sisters, children, stepchildren and their spouses of either the officers or their spouses. [6] An affirmative election to be covered must be made. Simply taking out an insurance policy does not equate to having made an election. See, e.g., Riley v. Taylor Orchards, 226 Ga. App. 394, 486 S.E.2d 617 (1997); Roe v. Roe, 259 Iowa 1229, 146 N.W.2d 236 (1966); Eaton v. Joe N. Miles & Sons, 238 Miss. 605, 119 So. 2d 359 (1960). [7] Kan. Stat. Ann. §44-505(a)(1). [8] In uncertain situations, an employee who thinks they are in a covered employment bears the burden of proof. Campos v. Garden City Co., 166 Kan. 352, 201 P.2d 1017 (1949).

particularly difficult for a small farming operation to maintain the necessary records, insurance and accounting to properly comply with the workers’ compensation system, and that a farming operation cannot pass the increased costs of coverage in the system on to the consumer.[2]

[9] See, e.g., Taylor v. Taylor, 156 Kan. 763, 137 P.2d 147 (1943). [10] State Compensation Insurance Fund v. Industrial Commission, 713 P.2d 405 (Colo. Ct. App. 1985). [11] Larsen v. D.B. Feedyards, Inc., 264 Neb. 483, 648 N.W.2d 306 (2002). [12] Iowa Code Chapter 85.

Note: Agricultural products grown or raised in accordance with a production contract may not result in an employer-employee relationship covered by workers’ compensation even if the party hiring the grower is otherwise a covered employer.[3] The state exemptions vary widely. Some statutes tie the exclusion to the pay level of a particular employee or the number of employees on the payroll or average payroll wages.[4] Other exemptions apply only to casual or seasonal labor. In some states, the exclusion applies to family members.[5] But, in these states that exclude from workers’ compensation certain types of agricultural labor, it is typically possible for the employer to voluntarily elect to be covered in order to gain tort immunity.[6]

Two Ag States and Two Different Approaches

Kansas. In Kansas, employers engaged in an “agricultural pursuit” are exempt from the workers’ compensation system. However, feedlots, sale barns, grain elevators and feed mills are not exempt. But, even if an ag employer is exempt, the employer can elect to be covered by the workers’ compensation system and purchase workers’ compensation insurance. If the election is made, an employee injured on-the-job

[13] Iowa Code §85.1(3) [14] Iowa Code §85.1(3)(a). [15] Volunteers, worker shares and interns (who are not also in school) are not exempt from workers’ compensation. [16] Iowa Code §85.1(b)(1-4). [17] Rodriguez, et al. v. Brand West Dairy, et al., Nos., 33,104 and 33,675, 2015 N.M. App. LEXIS 69 (N.M. Ct. App. Jun. 22, 2015). [18] Cueto v. Stahmann Farms, Inc., 94 N.M. 223, 608 P.2d 535 (N.M. Ct. App. 1980)(workers’ compensation statute inapplicable to ag workers of any employer, regardless of whether injured employee performing some non-agricultural service at time of injury). [19] The Iowa Supreme Court has held that illegal immigrants are included in the definition of “employee” for workers’ compensation purposes. Staff Management v. Jiminez, 839 N.W.2d 640 (Iowa 2013). [20] See, e.g., Haney v. North Dakota Workers Compensation Bureau, 518 N.W.2d 195 (N.D. 1994); Collins v. Day, 604 N.E.2d 647 (Ind. Ct. App. 1992); Ross v. Ross, 308 N.W.2d 50 (Iowa); Fitzpatrick v. Crestfield Farms, Inc., 582 S.W.2d 44 (Ky. Ct. App. 1978); Eastway v. Eisenga, 420 Mich. 410, 362 N.W.2d 684; State ex rel. Hammond v. Hager, 160 Mont. 391, 503 P.2d 52 (1972); Otto v. Hahn, 306 N.W.2d 591; Baskin v. State ex rel. Workers’ Compensation Division, 722 P.2d 151 (Wyo. 1986).

Continued on page 20 ➤ SPRING 2016 |

| 17

Ag law expert attorney Bob Malloy covers the hot legal issues.

Agent Bill Pearson of Sibley chaired the event.

Jen McPhillips IIABAâ&#x20AC;&#x2122;s Federal lobbyist discusses issues impacting agents at the Federal level.

Jeff Cuvelier presents his program successfully building your insurance business from the inside.

Best-selling author V.J. Smith brought the crowd to their feet with his inspiring presentation.

Tim Welch and Brad Buchanan of IMT conducted a workshop on auto insurance issues.

If you missed the 2016 IIAI Rural Agents/Small Town Agency Conference you missed a good one! Here are some pictures of the highlights.

Dean Brooks covers issues related to certificates of insurance.

Jim Gerkin of Pekin Insurance discusses “ATV’s, Motorcycles, Golf Carts, Snowmobiles Oh My!”

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cannot file a civil suit to recover for their injuries. Also, sole proprietor farmers can elect to include themselves in the system. The same applies for farm partnerships. For farm corporations that are included in the workers’ compensation system, all employees are covered. But, an employee owning 10 percent or more of the corporate stock has the option to not be included. Clearly, an important issue under Kansas law is what constitutes an “agricultural employee.” The workers’ compensation system does not automatically apply to employers that are engaged in “agricultural pursuits” (unless the employer is the state).[7] But an “agricultural business” is not exempt. Thus, for example, charging a fee for a service (such as a set rate for feeding cattle, baling hay or harvesting crops) constitutes an “agricultural business” to which workers’ compensation applies.[8] Kansas caselaw shows that whether an activity is an agricultural activity is difficult to determine. In general, an “agricultural activity” involves tillage or soil cultivation, under natural conditions, with large fields and associated farm buildings. But, when the activity involves processing of farm commodities or commercial activities, or where employees work in both agricultural and non-agricultural pursuits, questions can arise as to whether the overall activity is an “agricultural activity.” In essence, the key question is whether the nature of the specific job is agricultural rather than what the nature of the employer’s business is. So, an employee could be exempt from workers’ compensation coverage even though working for a non-agricultural business.[9] But, if the employer’s primary business is agricultural, the workers are exempt from workers’ compensation regardless of the nature of their specific jobs. In unclear situations, the courts examine the nature of the employer’s business, and generally do not find the labor to be agricultural unless the employer’s business is agricultural as well. Workers that handle agricultural products that have been cut and harvested are generally viewed to be in a commercial employment situation that is covered by workers’ compensation. IN these situations, there’s no actual agricultural activity involved such as tillage or soil cultivation. For employees that do different tasks, some of which are agricultural and some of which are not, the focus is on the overall nature of the person’s job. Temporary departures from the employee’s basic job are disregarded. For example, a farm employee that is usually engaged in farming activities who also fixes roofs and repairs farm machinery is still a farm employee engaged in agricultural activities. In a Colorado case, delivery of harvested crops by truck was determined to be part of the farming operation for workers’ compensation purposes.[10]

Note: A Nebraska case illustrates the difficulty that can arise in determining the line between agriculture activities and covered commercial activities. In the case,[11] an employee was injured while roping a steer that a cus-

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| SPRING 2016

tomer of the employer owned. The employer operated a livestock feedlot and claimed that it was exempt from workers’ compensation because it’s business involved the business of farming or ranching. The court, however, held that the employee, at the time of the injury, was engaged in a non-agricultural activity and was covered by the Nebraska workers’ compensation statute. The court noted that an employer could be engaged in two separate business activities, one that was commercial and one that was exempt as agricultural. However, the court focused on the activity the employee was engaged in at the time of the injury and determined that was not an exempt agricultural activity. Instead, the work was for the benefit of a separate commercial business that the employer conducted.

Iowa. Under Iowa workers’ compensation law,[12] an exemption is provided for persons engaged in agriculture for injuries sustained while engaged in “agricultural pursuits” or any other operations immediately connected to those pursuits whether on or off the employer’s premises,[13] unless the employer’s cash payroll amounts to $2,500 or more during the preceding calendar year.[14] Thus, Iowa farmers do not have to provide workers’ compensation for farmworkers unless at the time of injury, the employer’s total cash payroll to one or more employees amounts to $2,500 during the preceding calendar year. If a farm’s total cash payroll in the previous year exceeds $2,500, then the employer must buy workers’ compensation insurance for workers.[15] The Iowa workers’ compensation statute includes the following ag-related persons as exempt:[16] • The employer’s spouse, parents, siblings, stepchildren (including the spouse’s stepchildren), and the siblings, children and stepchildren of the employer’s spouse; • The spouse of a partner of a partnership; parents, siblings children and stepchildren of either a partner or spouse of a partner, and the spouse of the siblings, children and stepchildren of either a partner or the spouse of a partner who are employed by the partnership and actually engaged in agricultural pursuits or operations immediately connected with the partnership; • Officers of a family farm corporation or members of a limited liability company and the same related parties as referenced above where the primary purpose of the entity is farming or ownership of agricultural land and the persons are actually engaged in agricultural pursuits either on or off the business premises; • A person engaged in agriculture, or as a person engaged in agriculture who is otherwise exempt while exchanging labor with another owner of agricultural land, farm operator or person engaged in agriculture who is also exempt. Any farm that exceeds the cash payroll threshold should include all workers who perform labor for the farm on their workers’ compensation policy. The penalties for not carrying workers’ compensation may include large fines and possible

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out litigation.” The court offered no citation to any scholarly research or statistics to back up its claim.

Note: Federal law requires that a farmer employing H-2A workers provide workers’ compensation to all employees. If a farmworker is employed by a grower who also employs H-2A workers, then the grower must provide workers’ compensation to all other employees as well. Federal law requires that a farmer employing H-2A workers provide workers’ compensation to all employees.

Constitutional Issues Over the years, constitutional challenges based on equal protection have been mounted against state exemptions for certain types of agricultural workers. Those challenges have largely been dismissed on the basis that the states have a reasonable basis for excluding certain types of agricultural businesses and certain types of agricultural workers from workers’ compensation coverage. However, the New Mexico Court of Appeals recently held that the New Mexico exemption for particular agricultural workers was unconstitutional.[17] In this case, the plaintiffs’ cases were consolidated on appeal. They claimed that their on-the-job injuries should be covered under the state (NM) workers’ compensation law. One plaintiff tripped while picking chile and fractured her left wrist. The other plaintiff was injured while working in a dairy when he was head-butted by a cow and pushed up against a metal door causing him to fall face-first into a concrete floor and sustain neurological damage. The plaintiffs’ claims for workers’ compensation benefits were dismissed via the exclusion from the workers’ compensation system for farm and ranch laborers. On appeal, the court reversed, reaching a conclusion directly opposite of what the court concluded in 1980.[18] Using rational basis review (the standard most deferential to the constitutionality of the provision at issue), the court could find no rational purpose for the exclusion from workers’ compensation for farm and ranch laborers, and noted that the purpose of the law was to provide “quick and efficient delivery” of medical benefits to injured and disabled workers. Thus, the court determined that the exclusion violated the constitutional equal protection guarantee. The court stated that the exclusion circumvented the policy of the Act which was to balance the interests and rights of the worker and the employer. While the court stated that the exclusion “results in expensive drawn out litigation being the only available option to the employee,” the court failed to note that New Mexico is one of very few states that has adopted a “pure” comparative fault system. Under such a system, an injured party could be 99 percent at fault and still recover damages - although the recovery is reduced by the percentage of the injured party’s fault. Such a system would seem to greatly enhance the likelihood of settlement of personal injury cases without protracted and expensive litigation. However, the state tort system went completely unmentioned by the court likely because it undercuts the court’s claim that the exclusion results in “drawn

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| SPRING 2016

The court further believed that the exclusion for workers that cultivate and harvest (pick) crops, but the inclusion of workers that perform tasks associated with the processing of crops was a distinction without a difference. However, the court made no mention (even though it was briefed) that farm laborers are more likely to be illegal immigrants than are workers that are engaged in crop processing activities, and made no mention that New Mexico has at least four sanctuary cities or counties that harbor illegal immigrants.[19] The processing of workers’ compensation claims for such persons is not only illegal, it is more difficult due to the lack of documentation. Thus, an argument was provided to the court in briefs that the state had a legitimate interest in the farm laborer/processor distinction. The court did not address the point, holding the exclusion was arbitrary on its face. The court further dismissed the claim that the protection of the New Mexico ag industry from additional overhead cost served a legitimate state interest. The court made no mention of the data indicating that the cost of workers’ compensation insurance coverage rates for agriculture is commonly in the 6-8 percent of payroll range, with some states reporting the cost to be approximately 15 percent and, hence, did not address the argument that the exclusion had served a legitimate state interest in keeping food costs to the public down. The court did not address the point that has been made in similar cases that the ag exclusion slows down the mechanization of certain agricultural crop harvesting jobs as being a legitimate state interest. The court also made no mention that courts in numerous other states had upheld a similar exclusion for agriculture from an equal protection constitutional challenge.[20] The court stated that its decision was applicable to workers’ claims pending as of March 30, 2012. That’s the date, because of litigation in a different case, that the Workers’ Compensation Administration was on notice that the ag exclusion was unconstitutional. Conclusion Even in those states with an exemption from workers’ compensation for agricultural employment, it could be a good idea in certain situations for ag employers to elect to be covered. Without coverage, business assets can potentially be subject to claims of employees that are injured (or killed) on the job. In non-covered employment situations, the common law system applies. Under that system the employer has a duty to provide the employee with a reasonably safe place to work and reasonably safe tools and appliances with which to complete their assigned tasks. The employer also has a duty to hire reasonably competent employees. But, the employer is not an insurer of the employee’s safety. In any event, farm employers would be wise to visit with legal and insurance professionals to determine the best course of action to take with respect to employment relationships.

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Crop Insurance Industry Responds to EWG

By Tom Zacharias, President, National Crop Insurance Services

RESPONSE: The purpose of the premium discount is to encourage participation. Approximately 90 percent of planted acres are insured. Making crop insurance affordable increases the number of insured farmers and improves the actuarial performance of the program. And over the past five years farmers have spent an average of $4 billion annually out of their own pockets to purchase crop insurance.

2. EWG Statement: “Crop insurance is not a federal handout.” The federal government pays two-thirds of the premiums, covers most payouts to farmers and pays crop insurance companies to sell and service the policies. Net cost to taxpayers averaged $8.8 billion a year over the past three years. Sounds like a handout to us.” he Environmental Working Group (EWG) continues to portray crop insurance in a negative light. In response to its latest blog post, “The Crop Insurance Industry’s Top Seven Whoppers” (March 1, 2016), we have countered with a pointby-point response to EWG’s inflammatory assertions.

EWG Statement: “The crop insurance industry must be getting desperate. The federal crop insurance program from which this industry profits handsomely is coming under increasing scrutiny. The industry’s claims to defend this bloated program are straying farther and farther from reality.” Response: The crop insurance industry is weary of attempts to dismantle agricultural policy at a time when farm income has been declining and we are beginning to observe indicators of financial stress in agriculture. EWG Statement: “Here are the top seven whoppers the industry put out in two articles last month.”

3. EWG Statement: “The program “minimizes taxpayer costs.” Did we mention that taxpayers shelled out an average of $8.8 billion a year over the last three years?” RESPONSE: Did we mention farmers paid $12 billion in premiums over the past three years? Farmers share in the cost of the farm safety net. 4. EWG Statement: “Crop insurance “works like other kinds of insurance.” Federal subsidies keep premiums so cheap that farmers regularly get back more in payouts than they paid in premiums. How much money have you made lately from your auto or homeowners insurance?”

Response: “Hold the pickles, hold the lettuce...,” here are seven responses why EWG should not upset us: 1. EWG Statement: “The federal government “provides a discount” to farmers on crop insurance premiums. Taxpayers pay 62 percent of farmers’ crop insurance premiums. That’s not a discount, that’s a giveaway.”

RESPONSE: Farmers only receive an indemnity in the event of an insurable loss and after it is verified by a licensed and certified crop insurance adjuster. In the past three years farmers paid approximately $12 billion in premiums.

RESPONSE: “Like” other forms of insurance, farmers pay a premium, absorb first-dollar loss because of a deductible and only receive an indemnity if there is an insurable loss on their farm. Contrary to the critics, farmers are not “praying for drought” or “laughing all the way to the bank.” Critics have also likened farmers to “drunks at an open bar.” Here’s what farmers say in response to these claims:

SPRING 2016 |

| 25

• “I’ll guarantee you there’s not a farmer that I know of that’s into this so that they can collect insurance. We’re into this because we want to raise a crop.” – Marvin Andris, Milford, Illinois

• “I’ve never [met] a farmer who would rather have an insurance check than a good crop he can bank on his own. It’s a matter of pride.” – David Finch, Tulia, Texas

• “Anybody who thinks insurance is in place to make money is not living around here.” – David Andris, Milford, Illinois

5. EWG Statement: “Without crop insurance, the 2012 drought would have required “a very expensive ad hoc disaster bill.” Really? Crop insurance costs far more than ad hoc disasters. Between 1999 and 2008, insurance payouts were $11 billion more than disaster payments.”

RESPONSE: As a result of the drought of 1988 and the excessive flooding of 1993, Congress ultimately enacted the 1994 Crop Insurance Reform Act to avoid costly and difficult to administer ad hoc disaster programs. With crop insurance, farmers receive indemnity payments within weeks of their crop loss as compared to the process of enacting and administering disaster legislation. Because of the existence of a widely-available crop insurance program in 2012, there were no calls for ad hoc disaster. Recall in 2012 that farmers paid $4.1 billion in premiums and were estimated to have absorbed $12.7 billion in losses from deductibles prior to receiving any indemnity payments.

6. EWG Statement: “The United States would not enjoy food security without crop insurance. Please. Crop insurance really didn’t get rolling until after 2000, when subsidies ballooned. In 1999, before the large increase in subsidies, farmers planted 328 million acres in principal crops. In 2015, they planted 325 million acres were to the same crops, Subsidized crop insurance did not enhance American food security.”

RESPONSE: Crop insurance provides financial stability for the agricultural production sector. It enables the sector to respond efficiently to major crop disasters and does not disrupt the supply chain. In 2011 farmers in Texas received $2.6 billion in indemnities due mostly to drought. Of this, more than $1.3 billion was paid by mid-September of that year ensuring those farmers could plant again the next year. In 2012, one of the worst drought years in history, farmers received more than $17 billion in indemnities which allowed them the ability to plant again the next year and U.S. agriculture kept going.

7. EWG Statement: “Largely gone are the days of government support programs like direct payments.”

26 |

| SPRING 2016

Congress did, finally, end direct payments in 2014, but lawmakers swapped it for two new government support programs, Agriculture Risk Coverage and Price Loss Coverage. The first year out of the gate, these two programs paid out $5.2 billion – more than direct payments would have cost.”

RESPONSE: It might be worthwhile to point out that net farm income is down 56 percent, the largest threeyear percentage drop since the Great Depression. The purpose of a safety net is to provide a safety net.

EWG Statement: “The real story is that crop insurance has strayed far from what most people would recognize as a safety net for farmers facing potentially crippling losses because of bad weather.” RESPONSE: Maybe EWG should ask a farmer: • “Without crop insurance it would not allow us to farm.” – Greg Wegis, Bakersfield, California • “Crop insurance, for me, not only proved to be essential, it’s the reason I’m in business today.” – John Michael Pillow, Yazoo City, Mississippi • “The current drought would have taken out most, if not all, farms in the area where my operation is located.” – Shawn Holladay, Lamesa, Texas • “I can’t even think about farming without crop insurance.” – Bill Bridgeforth, Tanner, Alabama EWG Statement: “The crop insurance program has turned into just another income support program, with most of the support going to the largest and most financially-secure farming operations – at a high cost to taxpayers and the environment.” RESPONSE: The statement is just wrong. Farmers pay premiums annually and only receive an indemnity if a loss occurs. Private insurers share in the losses and service the policies. Regarding the environment, EWG cannot have it both ways. If crop insurance induces farmers to plant on environmentally sensitive land then why have planted acres have remained constant (See #6 on EWG’s blog…“In 1999, before the large increase in subsidies, farmers planted 328 million acres in principal crops. In 2015, they planted 325 million acres were to the same crops…”)? Studies have demonstrated that crop price, not crop insurance, is the major driver behind planting decisions. There is no analytical or science-based foundation to support the statement that crop insurance is a significant driver of planting decisions. Farmers must also remain in compliance with conservation requirements in order to maintain their eligibility for crop insurance.

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The Vaughan Institute of Risk Management and Insurance Revisited After 10 Years by Dana Ramundt

read with interest the numerous articles devoted to Millennials and as we call it, “the war for talent” in the Winter 2016 issue of “Viewpoint.” During the past 44 years of being in this incredible industry and running my own business, I have noticed that more frequently than I care to admit, I occasionally fail to see the things that are closest to me. As evidenced by some of the comments in the articles, it appears that it doesn’t only happen to me but others, so I decided to revisit what I, IIAI, some of its members and countless insurance companies have accomplished the past 10 years with The Vaughan Institute of Risk Management and Insurance. The Vaughan Institute recently celebrated its 10th anniversary last October, and what a grand celebration it was. Many of you may recall the Spring 2008 edition of “Viewpoint” that was devoted to The Vaughan Institute. The story was told of how it came to be and the key figures that initiated it. Our industry should still be beholden with debt and gratitude to people like Gary Fethke, the then Dean of the Tippie College of Business at The University of Iowa, Dr. Jay Sa-Aadu, chairman of the Finance Department and of course Dr. Vaughan, who got me the appointment with Dean Fethke and Mary Sue Coleman, the President of the University at the time, which allowed me the opportunity to pitch the merits of reestablishing the Program. They recognized the value of what an insurance program back at The University of Iowa would mean to the State of Iowa,

the insurance industry and obviously, the students in this State looking for a great career with unlimited earning potential and full employment. In spite of the passing of Dr. Vaughan in 2004, 3 Deans, 3 Finance Department Chairmen, 3 new faculty and 10 years later, the Vaughan Institute continues to be a template for the synergy that can be accomplished when Academia and private industry join forces to solve problems. The Vaughan Institute is one of the premier programs currently going on at Tippie, and I am reminded frequently at how proud and excited Dean Sarah Gardial is of its accomplishments and future. So, after 10 years, let’s look at some of the accomplishments of The Vaughan Institute, by the numbers: • 274 graduates since 2006 (nearing 300 by year end 2016) • Over 150 employers have hired RMI graduates • 14 different industries represented by those employers • RMI Graduates located in 24 different states • RMI graduates located in 4 foreign countries • 40% of graduates working directly for insurance companies, brokers and agencies • 72% of graduates remained in the Midwest • 40% of graduates working in Iowa • Established the Iowa Chapter of Gamma Iota Sigma (International Risk Management Organization for students) • Established a Mentor Program linking students with Industry

Professionals • Created a Young Alumni Board who are currently in the Industry • Added two new faculty to the Program • 60 current RMI candidates • Over 300 students taking insurance related courses I have mentioned frequently while speaking to industry groups of just how lucky we are in the insurance industry here in Iowa. Most of our students are Finance majors, the top rated major program in the Tippie College of Business. It is the most difficult major to get into and stay in, and while the finance industry is not at full speed in terms of hiring, we have access to the best and brightest of those students who see the value in completing the RMI Certificate. Employers know and understand their value as well. Last spring, 28 of the 29 graduating seniors in May had accepted full time employment offers by March 1st. Companies hiring these students included Chubb, Holmes Murphy, Edward Jones, Cigna, True North, RPS, CNA, AIG, Grinnell Mutual, Fidelity. IMT, Lockton Companies, Lincoln Financial, Transamerica, United Fire Group, Travelers and Nationwide. They were hired for positions like PC producer, benefits producer, business analyst, investment advisor, underwriter, E&S broker, risk assessment analyst, benefits administrator, actuary and pricing analyst. Last summer The Institute hired two new full time faculty for The Vaughan Institute. Thomas Berry-Stoelzle came to us from the University of Georgia

SPRING 2016 |

| 29

where he was an Associate Professor of Risk Management and Insurance. He holds a Ph.D. in business with a concentration in risk management and insurance from the University of Cologne. Richard Peter is an Assistant Professor of Finance having come to Iowa from Munich where he did his undergraduate studies in business research and mathematics. He is currently performing research in the area of risk management, focusing on the role of information on insurance markets, the economics of prevention and saving decisions and the management of health risks. His research has been published in “Journal of Risk and Insurance,” “Journal of Risk and Uncertainty,” and “Economics Letter.” The Gamma Iota Sigma (GIS) chapter brought home several national awards from their National convention last spring and this year we have students competing in San Diego at the SpencerRIMS Risk Management Challenge. Twenty university teams from across the United States and Canada will be selected to participate in the 3 month competition. The teams are given a case study and are challenged to develop the best and most comprehensive risk management program to address the issues. Their submissions will be judged by a prestigious panel of risk management professionals and the top 8 teams will be allowed to present again to a different panel, competing to be one of the top 3 teams in the country. If selected, the Team will bring back a prestigious honor to The Vaughan Institute. Dean Fethke and Jay Sa-Aadu had the foresight to establish the program as an Institute, which meant that the Program would never be subjected to the vagaries of the Board of Regents’ Budgeting process or in other words, cut due to budget restraints. The University would partially fund the salary of one person and the Institute would be responsible for raising the balance of the funds needed to continue its operation. To date, thanks to a handful of agents and a myriad of insurance companies, the Vaughan Institute has raised nearly $5 million toward its future. You may remember

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that the Independent Insurance Agents of Iowa provided the seed money of $200,000 over a period of 10 years for the Institute, followed by The Dana Company, True North and AW Welt Ambrisco with another $150,000, and Allied pledging $1,500,000. There was overwhelming financial support for the Institute to get off the ground and that support continues to grow with the proof of its value as evidenced by the quality of employees the Institute is producing. There are countless ways agents and companies can get involved with the Institute and its students. You can become a Mentor, create an internship, you can speak to a class, attend as a presenter at a GIS meeting, provide a scholarship, or even attend my golf event every August at Finkbine in Iowa City, where I bring 20 or more students to meet industry people by positioning the students on the greens. This will be the 10th year for my event which has been a sell out for the past 4 at 144 golfers. To date I have contributed over $177,000 to the Vaughan Institute and provided 128 scholarships to students, as well as funded GIS trips, NAPSLO trips and other student activities. My involvement with these bright, passionate and intelligent students has brought a whole new energy to me on a personal and professional level, and I know you would experience the same were you to get involved with these young people in any capacity. So, how does all of the above relate to bringing young people into this incredible industry that I have so loved for 44 years? Here is how I see it shaking out. I have met all 274 RMI graduates and I can honestly tell you in my opinion, only 6 have had the innate attributes to go directly into a production or sales role for an agency and be successful. Of the 6, only one has not made it in a producer role. He could have, had he joined an agency that would have helped, nurtured and taken the time to develop him but to their own admission, they did none of the sort. He is now with a company but really belongs in an agency. When I speak to these students,

without exception, I suggest that they ALL go to a company for at least 1 year. Companies have proven methods to train. The majority of agencies do not. In addition, most college students, regardless of how mature they are, do not have the real world experience to go directly into sales and due to financial pressures, typical agencies don’t have the financial patience to let them mature before they terminate the employment due to lack of production. If a graduate goes to a company, they will learn the industry in a proven methodical way, they will learn about the individual agencies with which they work. They will see what kind of agency they are, what kind of integrity they have both individually and collectively, they will learn about the demographics and economics of the respective communities in which the agencies are located and they will pick up some knowledge of non-compete and non-piracy agreements before they commit to them. It’s a win-win situation for BOTH. Most agencies should not be directly looking to Risk Management and Insurance programs to staff their internal perpetuation plans, assuming they even have one. It is not a logical progression for most. They should be looking for Company people with which they have a good working relationship, respect for their talents and can show the value of leaving the Company for the benefits that independent agencies inherently provide. Like Roger Sitkins has described, the industry is made up of “shooters” and “skinners.” If you are looking for “shooters” my advice is to wait until someone else has taught them what the target looks like, how to load the gun and then sit back and wait to see who hits the target most often. So, there’s a current look at 10 years of the Vaughan Institute, what we have accomplished, where we are headed and my thoughts about the future of independent agents and their future owners. It’s a good future and due to The Vaughan Institute, we currently have 274 more potential “shooters.”

We can help with both. With friendly underwriters who listen, and a full complement of products to serve your small-to-mid-size commercial insurance needs (including enhanced BOP, surety, and packaged coverages), Western National is your one-stop shop for getting business done. The proof is in the partnership.

THANKS A

BILLION! You’ve helped West Bend reach $1 billion in annual premium volume. And you’ve helped make us one of the leading property and casualty insurers in the Midwest. We hope you’re as proud to offer our products and services as we are to have you represent us.

The Big “I” Advocacy is for More Than Just Our Business Interests!

CONSUMERS WIN TOO! T by Bob Skow, CPCU, CAE

his issue of Independent Insurance Agents of Iowa’s Viewpoint magazine focuses on agriculture insurance issues. Two of the articles discuss the importance of crop insurance and respond to critics of the Federal Crop Program. The Big “I” over the last few years has devoted a great amount of resources fighting for the interests of our members and the customers of our members. No better example is crop insurance; while it is an important source of income for many of you, it is even more critical for the economic safety net it provides growers. If farmers can’t pay their bills at the time of natural disasters… that in turn creates problems for farm lenders, businesses and manufacturers who depend on these same farmers to purchase their products. As we learned in the mid-80’s, the impact to the economy of a state like Iowa can be catastrophic when farmers struggle. The current crop insurance program has made a huge impact on the economy of this country, and the many improvements made in the program since the 80’s is one of the main reasons we have not had another significant agriculture recession. Our country’s food supply has never been stronger and the percent of a U.S. household budget devoted to food is the lowest in the world. A resident of the U.S. spends less on food than

any other country, only 6%, which is significant when you realize there are countries that spend close to half of their income on food. The Big “I” advocacy efforts on issues like health and flood insurance are other great examples of where our interests are also in the best interest of Americans who pay the cost for these coverages. Private sector delivery of insurance by an independent agent is in the consumer’s best interest too. Our interests align — when independent agents prevail so do their clients. At the state level the Independent Insurance Agents of Iowa fight for the business interests of our members, but it is no coincidence that Iowans enjoy one of the best insurance climates in America. Auto insurance, liability laws

and workers’ compensation all are issues legislators look to us for advice and counsel on when they are seeking the best solutions for both the industry and consumers. The Big “I” for years has lead the way on many of these issues. So when you think about everything insurance does for the security of individuals, businesses and farmers — remember the efforts of Iowa’s independent agent community and their support of the Big “I’s” advocacy programs also have a great deal to do with why things are so good in Iowa. Together we do make a difference — on everyone’s behalf.

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What They’re Saying “Crop insurance is the cornerstone of the farm safety net. You have my word to continue to protect, preserve, and improve the number one risk management tool in every farmer’s toolbox.” After decades of costly government bailouts, crop insurance emerged as a way to reduce taxpayer risk and leverage private-sector efficiency following agricultural disasters. Now, farmers buy insurance and private companies underwrite policies so taxpayers aren’t on the hook for the entirety of disaster assistance. The 2014 Farm Bill made crop insurance the centerpiece of modern-day farm policy, replacing disaster packages and direct subsidy payments. But crop insurance cannot succeed unless it remains affordable and widely available to farmers and economically viable for private-sector participation.

Crop Insurance Basics n Private companies sell and service 1.2 million insurance policies that protect 288 million acres and $102 billion worth of goods. n Policies are available on more than 125 crops— including fruits and vegetables—and to farmers of all sizes in all states. n Over the last five years, farmers have spent an average of $4 billion annually out of their own pockets for insurance protection tailored to their unique needs. n Private claims adjusters verify losses following disaster and speed assistance—usually within 30 days—to affected farmers. n The government discounts premiums and covers some losses, but taxpayers avoid future ad hoc disaster bills, which cost nearly $70 billion from 1989 to 2009.

Sen. Pat Roberts (R-Kansas) Senate Agriculture Committee Chairman

“Today, crop insurance is the foundation of this Farm Bill and the farm safety net. The farmer gets a bill, not a check with crop insurance…and they don’t get help unless they really need it.” Sen. Debbie Stabenow (D-Michigan) Senate Agriculture Committee Ranking Member

“American farm policy and crop insurance are vitally important. Foreign subsidies and tariffs are high and rising, putting American farmers at a disadvantage in a stiff competitive global market. Without federal crop insurance there would be no multi-peril insurance for producers.” Rep. Mike Conaway (R-Texas) House Agriculture Committee Chairman

“Crop insurance is a way to avoid bailouts…. Farmers don’t control weather or prices. To maintain food production in this country we have to have this.” Rep. Collin Peterson (D-Minnesota) House Agriculture Committee Ranking Member

“Farm Bureau places a high priority on the decisions to protect and strengthen the federal crop insurance program and not reduce its funding.” Bob Stallman, President American Farm Bureau Federation

“When Mother Nature strikes or markets fluctuate, without crop insurance, many family farmers and ranchers could be put out of business.” Roger Johnson, President National Farmers Union

For more information visit

www.cropinsuranceinamerica.org

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INDEPENDENT INSURANCE AGENTS OF IOWA 4000 Westown Parkway, Suite 200 West Des Moines, Iowa 50266

PRSRT STD U.S. Postage Paid Des Moines, IA Permit No. 2538

2016

INDEPENDENT INSURANCE AGENTS OF IOWA PROGRAMS SPONSORS A special thank you to the following sponsors for supporting IIAIâ&#x20AC;&#x2122;S Conferences and Programs in 2016.

PLATINUM

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Allied Insurance EMC Insurance Companies The IMT Group Independent Agents Service Corporation Iowa Mutual Insurance Company Progressive United Fire Group

AAA Minnesota/Iowa Continential Western Insurance Co. Grinnell Mutual Reinsurance

BRONZE Accident Fund/United Heartland Acuity Auto-Owners Insurance Columbia Insurance Group Diversified Crop Insurance Services Farmers Mutual Hail Insurance Company Hastings Mutual Insurance Company

S I LV E R ADM Crop Risk Services ASI Underwriters Corp Concorde General Agency Great American Insurance Companies GuideOne Insurance Imperial PFS LeMars Insurance Company Merchants Bonding Company Partners Mutual Insurance Company Pekin Insurance QBE - NAU

International Ag Insurance Solutions Liberty Mutual Insurance M.J. Kelly Company of Iowa Markel FirstComp North Star Mutual Insurance Company ProAg Rain & Hail Insurance Services SECURA Insurance Society Insurance

State Auto Insurance Travelers Insurance West Bend Mutual Insurance Company Western National Insurance Westfield Insurance

Independent

Insurance Agents of Iowa