Typically, a crop insurance audit was performed by the U.S. Risk Management Agency (RMA) on crop insurance claims equal to or exceeding $200,000. In 2021, however, RMA Acting Administrator Richard Flournoy told Red River Farm Network that the RMA is implementing data mining to improve the precision of audits. This likely means that crop insurance audits will not be automatically triggered as before, and that there will likely be fewer audits than before.
Data mining is just one example of innovation within the agricultural insurance industry in recent years. In fact, Farm Credit Services of America processed $4.5 million in crop insurance claims in 2020, using drones to improve crop insurance audit efficiency. With drones, adjusters can take pictures to document crop damage and include these images with crop insurance claims.
However, technological advancements like these do not remove the need to prepare for crop insurance audits.
What triggers a crop insurance audit?
According to the National Agricultural Law Center, an audit is triggered by the amount of a crop insurance claim.
Basically, the RMA requires a crop insurance audit for any claim that equals or exceeds $200,000 on at least one crop in a county.
Contrary to popular belief, crop insurance audits do not mean that a farmer is guilty of wrongdoing. Rather, audits verify that an authorized insurance provider has internal controls in place to assess liability and calculate indemnities in compliance with FCIC procedures.
What happens during a crop insurance audit?
Crop insurance audits are completed by the Authorized Insurance Provider, as required by the federal Risk Management Agency. Growers and producers work with the AIP’s assigned adjuster throughout the audit. If you’re a producer, it’s worth noting that your individual crop insurance agent is not involved in the audit process.
Audits occur prior to a claim’s payment, and you cannot receive your claim payment until the audit is complete. You can take many steps to prepare beforehand for an insurance audit.
Keeping good records before crop insurance audits
One of the first steps you can take when preparing for an audit is keeping records. You should keep and maintain a minimum of three year’s records of your actual production history (APH) on a unit basis and organized by each acreage.
Here are some tips for organizing your crop production records:
- Establish a good unit structure, since this is the foundation for how you’ll organize your production records. You can use FSA Form 578 acreage report to map and organize your unit structure.
- Organize bushel records separately, similar to how acreage is listed on your schedule of insurance. Ensure that acreage numbers match claim paperwork, and that you have separate bushel records for each acre.
- Sort each year’s production records by insured unit, irrigated or non-irrigated crop type, and production practice (single or double crop).
- Make copies of records that can deteriorate over time, like weight tickets and settlement sheets.
Documents needed during the audit process
During an audit, producers must provide their APH records that describe each unit’s corresponding acreage and production details, including total production amounts, the amount sold, any stored amount, and similar information.
In this case, the more information a producer can give about their bushels, the better.
There are many acceptable types of documents you can use to provide information during crop insurance audits, including:
- Settlement sheets or weight tickets that show the crop year, buyer’s name and address, producer’s name, date weighed, field identification number, crop type, and similar details.
- On-farm storage documents like load records, scale tickets, or bin measurements done by a third party.
- Combine monitor records that show field locations, unit number, crop type, harvest date, harvest quantity, and records showing your machines are calibrated to manufacturer specifications.
- Feed records that show the type and amount of product fed to livestock, including the crop type, unit number, the type and weight of the animals, and feeding date.
What happens after crop insurance audits?
Once a crop insurance audit is completed, your claim will continue being processed and conclude with your payment. If a mistake is discovered on the claim during the audit, your claim will be adjusted to reflect the amount supported by the documentation.
If you disagree with the amount of an adjusted claim, you can choose an arbitration process. In an arbitration proceeding, two claims are submitted. The first is the original claim that you filed prior to the adjustment. The second document is the adjuster’s claim, which includes the adjusted amount, and the adjuster’s notes on the reason for the different amount.
An arbitration proceeding must occur within the year following the adjuster’s decision. In cases where the claim is adjusted by the RMA instead of the AIP, you have 30 days to appeal the decision to the USDA’s Appeals Division.
As always, please note that this information is for education purposes only and should not replace the expert advice of a federal crop insurance attorney.
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