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say that it would be challenged by state level accounting to determine the efficiency and the corresponding discount. We agree RMA does not have the financial or technical resources to make these determinations. However, we submit that by adding the phrase “to the location”, RMA is in effect requiring state level accounting. How else will RMA be able to determine if the efficiency and discount correspond “to the location”?

For example, assume a company that writes in two states, A & B. State A has $75 million in premium on 10,000 policies and state B has $25 million in premium on 50,000 policies. Total net book premium is $100 million. State A’s A&O is $15.75 million, state B’s A&O is $5.25 million. Total A&O is $21 million. The company proposes an efficiency derived from a new computer system that saves $1 million in expenses, or $16.67 per policy. State A’s savings are $166,700. State B’s savings are $833,500. The proposed discount is 1%. If RMA chooses not to conduct state level accounting, it cannot determine if the discount corresponds to the location of the efficiency. Moreover, in this example, if RMA conducted state level accounting, RMA should deny the proposal because the company cannot offer the same discount to all policyholders per section 400.715(c) because a 1% discount results in premium reductions of $750,000 in state A and $250,000 in state B while the location of the efficiency is quite the opposite.
The proposed rule seems to assume that a multi-state writer has consistent delivery costs across states. This is, of course, a flawed assumption. Premium amounts and policy counts vary significantly by state. Corresponding delivery expenses vary significantly as well. Therefore state level accounting is a necessary component of any PRP plan.

We urge RMA to require state level accounting because otherwise the calculation of the discount and its application is meaningless and not within the context of the statute. As part of such a requirement, RMA must also recognize that some operating costs must be allocated between states and lines of business. If RMA is unable to administer a state level accounting program, then RMA should withdraw the PRP proposed regulation and offer it at such time as RMA has the resources to conduct state level accounting.

Section 400.719(a)10 – This section indicates that PRP plans must not violate applicable state laws regarding the licensing and conduct of agents in the solicitation and sale of insurance. While we agree with this requirement, we are unclear how RMA will make this determination unless it involves state approval of PRP prior to its availability. As noted in our comments above, this provision also by necessity requires the involvement of state regulators, blurring the lines of regulatory authority between the states and RMA and potentially driving up administration costs for companies and RMA.

Section 400.719(a)13 – This item provides that RMA must determine that there is not a reduction in the total delivery system’s ability to serve all producers in its approval process for premium reduction plans, including small producers, limited resource farmers, women and minority producers, and producers located in areas with small volumes of crop insurance business. This item correctly, in our view, describes a likely outcome and scenario of reduced availability of the program to the identified groups of producers, should PRP plans be approved by RMA. Clearly, RMA should be concerned about these issues, and it is our contention that this concern, if properly acted upon by

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