MPCI Agent Enforcement Bulletin (1/08)

DATE: January 24, 2008 TO: All Resident Multi-Peril Crop Insurance Producers FROM: Kim Holland, Insurance Commissioner State of Oklahoma RE: State and Federal Rebating Enforcement Initiative Dear Licensee: Numerous states and the Risk Management Agency (RMA) are launching an initiative to increase the level of shared information between state insurance commissioners and RMA about the Standard Reinsurance Agreement, specifically illegal rebating of Federal crop insurance premiums, as well as other government insurance regulations. The states and RMA have determined that incidents of illegal rebating of Federal crop insurance premiums have grown in recent years. Attempts to circumvent state rebating prohibitions have become increasingly prevalent and more complex. Examples of schemes with the hidden purpose of illegal rebating include the creation of special investment entities and the recruiting of producers as licensed sub-agents to write their own policies. Consequently, the states are pledging to cooperate with RMA to discover and end illegal rebating schemes. Specifically, the states will do the following: • Notify RMA and other states when a Federal crop insurance rebating complaint or allegation is received; • Provide RMA and other states background information on relevant past rebating investigations; • Coordinate with RMA and other states on all new rebating investigations, as appropriate; • Share with RMA and other state’s specialized rebating analyses (such as information generated from data mining); • Share state and Federal legal expertise to review and analyze complex rebating schemes as well as other crop insurance issues; • Inform RMA and other states of any assessment of penalties or sanctions taken by a state involving a rebate violation; and • Take appropriate actions when violations of the respective laws are identified. We are confident that this joint effort will produce results targeted at maintaining professional conduct and ethics in the marketplace. These procedures will enable the states and RMA to be better equipped to handle traditional illegal rebating and will enable both to have better capability in identifying and targeting various schemes that have been especially devised to circumvent rebating prohibitions. Given this increased sharing of information between state and Federal agencies, we expect to enhance our ability to uncover illegal rebating where or when it exists and to be more effective in the enforcement of rebating prohibitions. We are especially intent on seeing the results of our efforts for the spring 2008 crop year selling period for Federal crop insurance. You can assist us by ensuring that all of your employees, loss adjusters, affiliated agents and other interested parties are fully aware of the rebating laws, regulations and prohibitions, understand that serious penalties can result from illegal rebating, and have been notified of the coordinated efforts of state and Federal insurance regulators to address illegal acts. Sincerely yours, Kim Holland