SRA Appendix IV

2021 SRA—Appendix IV

07-01-20

APPENDIX IV
QUALITY ASSURANCE AND PROGRAM INTEGRITY
SECTION I. GENERAL QUALITY CONTROL PLAN REPORTING REQUIREMENTS
(a)

The Company shall provide the following quality control information with its
annual Plan of Operations, in accordance with section IV(j) of Appendix II:
(1)

A detailed description of the Company’s Quality Control Plan that
demonstrates that it meets or exceeds the following internal control
elements:
(A)

Control Environment. The control environment sets the tone of an
organization, influencing the control consciousness of its people.
Factors include the integrity; ethical values and competence of the
entity’s people; management’s philosophy and operating style; the
way management assigns authority and responsibility, and
organizes and develops its people; and the attention and direction
provided by the Company’s management.

(B)

Risk Assessment. A precondition to risk assessment is
establishment of objectives that shall be identified in the Quality
Control plan. Risk assessment is the identification and analysis of
relevant risks to achieve the stated objectives of the Company’s
Quality Control plan, and form the basis for determining how the
Company will manage risk to the crop insurance program.

(C)

Control Activities. The Company shall identify the way the
policies and procedures that help ensure management directives are
carried out. These controls help ensure that necessary actions are
taken to address risks and limit non-compliance. They include a
range of activities as diverse as approvals, authorizations,
verification, reconciliation, reviews of operating performance,
security of assets and segregation of duties. The Company plan
will also include under Control Activities all the required reviews
and obligations required by Appendix IV.

(D)

Information and Communication. The Company’s plan shall
include how pertinent information is identified, captured and
communicated in a form and timeframe that enables the Company
and its affiliates to carry out their responsibilities. Include an
explanation of standard reports containing operational, financial
and compliance related information that make it possible to run
and control the business.

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(E)

(2)

(b)

07-01-20
Monitoring. The Company shall articulate the process used to
monitor their Quality Control Plan. The process will assess the
quality of the Company’s performance during each reinsurance
year. This is accomplished through ongoing monitoring activities,
separate evaluations, or a combination of the two. The process
will also identify how quality control deficiencies are reported up
through the chain of command and how the most serious matters
are reported to the Company’s top management.

Quality control review information:
(A)

The name and title of the official in charge of quality control;

(B)

The types of reviews that will be conducted and the time period
when such eligible crop insurance contracts will be selected for
each review; and

(C)

A complete description of the process to be followed by the
reviewers for conducting each of the reviews.

Approval of the quality control information required in subsection (a) provided by
the Company in its Plan of Operations is not a determination of the sufficiency of
the Company’s quality controls. The sufficiency of the Company’s quality
controls will be determined through compliance reviews that evaluate the
effectiveness of the Quality Control Plan to ensure compliance with this
Agreement.

SECTION II. TRAINING OF AGENTS, LOSS ADJUSTERS, AND OTHER PERSONNEL
(a)

General Company Responsibilities
(1)

The Company is responsible for establishing a “Training and Performance
Evaluation Plan” (TPEP) and submitting the TPEP in the Company’s Plan
of Operations, in accordance with Appendix II. Nothing in these
requirements precludes the Company from providing training that exceeds
these requirements.

(2)

The TPEP shall:
(A)

State the measurement standards acceptable for:
(i)

Test proficiency; and

(ii)

Satisfactory work performance.

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(B)

Describe the internal control measures used to assign work and
track, monitor and evaluate work performance against the
measurement standards under subparagraph (a)(2)(A);

(C)

Describe the additional training and monitoring applicable to any
individual who fails to meet the measurement standards specified
in subparagraph (a)(2)(A);

(D)

Describe the training curriculum developed from subsections (b)
and (c) for:
(i)

New agents and new loss adjusters;

(ii)

Experienced agents and experienced loss adjusters;

(iii)

Agents and loss adjusters with deficient work performance
to meet the standards established in subsection (a)(2)(A);
and

(iv)

Employees performing functions relating to sales and
service, loss adjustment, and underwriting.

(E)

Describe the individual training for employees, agents, loss
adjusters, or other affiliates with respect to specific crops, areas,
and plans of insurance serviced by such individuals;

(F)

List the names of the individuals responsible for the training under
the TPEP;

(G)

Provide a timeline for training all individuals identified in
subsection (a)(2)(D)(i-iv) prior to the time the work is performed;

(H)

Describe the Company’s plan for taking corrective, follow-up, or
remedial actions when additional training does not correct the
identified deficiencies.

(I)

Describe the procedure for the Company to maintain, retain, and
provide to FCIC upon request:
(i)

The tracking and evaluations of the historical performance
of individuals identified in subsection (a)(2)(D); and

(ii)

Records of all corrective, follow-up, or remedial actions
taken with respect to any individual identified in subsection
(a)(2)(D).

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(J)
(3)

(b)

07-01-20
Contain a provision to conduct such other training that may be
required by FCIC.

An annual Training and Performance Evaluation Report (TPER) shall be
submitted with the Company’s Plan of Operations, in accordance with
Appendix II. The annual TPER shall provide:
(A)

An evaluation of each agent and loss adjuster. Such performance
evaluation shall include a review of the loss ratios associated with
such agent and loss adjuster and the number and type of any errors
or omissions related to the compliance with obligations under the
Agreement; and

(B)

A report of any remedial actions taken by the Company to correct
any error or omission or ensure compliance with the Agreement.

Sales Training Curriculum and Requirements
(1)

The sales training curriculum developed by the Company shall include
those eligible crop insurance contracts the Company will be selling or
servicing in the States identified in the Company’s Plan of Operations, in
accordance with Appendix II, and include at a minimum (for new agents
and employees performing functions relating to sales or service,
comprehensive information on all of the following, and for experienced
agents and employees performing functions relating to sales or service,
comprehensive information on updates or changes in the following),
sufficient information to make such individuals proficient in:
(A)

The meaning of the terms and conditions of the Common Crop
Insurance Policy, Basic Provisions and applicable Crop Provisions,
published at 7 C.F.R. part 457, and the other available plans of
insurance such as the Group Risk Plan published at 7 C.F.R. part
407, the revenue insurance plans, pilot programs, and other plans
of insurance found on FCIC’s website at www.rma.usda.gov, and
any changes thereto;

(B)

All applicable endorsements, Special Provisions and options and
any changes thereto;

(C)

The benefits and differences between the applicable plans of
insurance specified in subparagraph (A) and their suitability to
farming conditions and operations, including conservation
activities and agronomic practices (including organic and
sustainable practices), in the relevant area;

(D)

The actuarial documents and their use;
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(2)

07-01-20

(E)

The procedures applicable to the sales and service of eligible crop
insurance contracts and any changes thereto;

(F)

How to properly fill out and submit all applicable forms,
documents, notices and reports;

(G)

The requirements under applicable Federal civil rights statutes and
methods to encourage program participation, including, but not
limited to, participation of limited resource, women, minority, and
underserved producers or in underserved areas;

(H)

How to recognize anomalies in reported information and common
indicators of misrepresentation, fraud, waste or abuse, the process
to report such to the Company, and appropriate actions to be taken
when anomalies or evidence of misrepresentation, fraud, waste or
abuse exist;

(I)

Compliance with applicable laws and regulations governing
business conduct and ethics, including, but not limited to, rebating
prohibitions, conflicts of interest, and controlled business, etc.; and

(J)

Any other requirements as may be established by FCIC.

The Company shall ensure the following:
(A)

Any new agent or other individual who solicits or otherwise
promotes crop insurance sales on behalf of the Company shall
participate in a structured training program on all of the items
listed in paragraph (1) before selling or servicing any eligible crop
insurance contract.

(B)

Any experienced agent shall annually complete structured training,
on updates or changes specifically related to the items listed in
paragraph (1), or that are identified by FCIC or the Company
where errors or omissions were identified during quality control
reviews or processing of the sales related documents.

(C)

All new agents shall pass a basic competency test before they can
sell or service an eligible crop insurance contract (all testing
records, including test results, shall be maintained in accordance
with section IV(g) of the Agreement). Basic competency tests
shall specifically relate to the items listed in paragraph (1) and
determine the proficiency of the individual who completed the
required training. Additionally, the Company shall review the test

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results and document follow-up training for any deficiencies
identified.

(c)

(D)

All agents shall retake and pass the basic competency test (in
accordance with the standard established in subsection
(a)(2)(A)(i)) every three years.

(E)

If the agent was not employed by or did not contract with the
Company in the previous year(s), the Company shall obtain, and
make available upon request, documentation that the agent has
passed the basic competency test within the past 3 years with
another AIP.

(F)

Proficiency is established by passing a written test meeting the
standards of the TPEP, and maintaining satisfactory work
performance during the respective crop year measured against the
measurement standards established under subsection (a)(2)(A).

(G)

In addition, the agent is considered to maintain satisfactory work
performance if the results of reviews to respond to producer
complaints, State Departments of Insurance or FCIC inquiries, or
other quality control reviews identify no material errors.

Loss Adjustment Training Curriculum and Requirements
(1)

The loss adjustment training curriculum developed by the Company shall
include those eligible crop insurance contracts which the Company will be
selling or servicing in the States, identified by the Company in its Plan of
Operations, in accordance with section V(b) of Appendix II, and include at
a minimum (for new loss adjusters, or employees performing functions
related to loss adjustment, all of the following and for experienced loss
adjusters or employees performing functions related to loss adjustment,
updates and changes), sufficient information to make such individuals
proficient in:
(A)

The items listed in subsections (b)(1)(A), (B), (C), (D), (F), (H),
(I), and (J);

(B)

The procedures applicable to loss adjustment of eligible crop
insurance contracts and any changes thereto;

(C)

How to properly verify the accuracy of the information contained
on applicable forms, documents, notices and reports;

(D)

How to properly determine the amount of production to be used for
the purposes of determining losses;
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(E)

The requirements under applicable Federal civil rights statutes; and

(F)

Any other requirements as may be established by FCIC.

(2)

The Company shall ensure the following for loss adjusters or employees
that adjust or sign any claim for any eligible crop insurance contract:
(A)

Any new loss adjuster shall participate in a structured training
program on all of the items listed in paragraph (1) before signing
any claim under an eligible crop insurance contract.

(B)

Any experienced loss adjuster shall annually complete structured
training on updates or changes specifically related to the areas
listed in paragraph (1) or that are identified by FCIC or the
Company as errors or omissions discovered during quality control
reviews or processing of the loss related documents.

(C)

All new loss adjusters shall pass a basic competency test (all
testing records, including test results shall be maintained in
accordance with section IV(g) of the Agreement) before signing
any claim under an eligible crop insurance contract. Basic
competency tests shall specifically relate to the areas listed in
paragraph (1) and determine the proficiency of the individuals who
completed the required training to accurately and correctly
determine the amount of the loss and verify applicable information.
Additionally, the Company shall review the test results and
document follow-up training initiatives for any deficiency.

(D)

All loss adjusters shall retake and pass the competency test every
three years.

(E)

If the loss adjuster was not employed by or did not contract with
the Company in the previous year(s), the Company shall obtain,
and make available upon request, documentation that the loss
adjuster has passed the basic competency test within the past 3
years with another AIP.

(F)

Proficiency is established by passing a written test meeting the
standards of the TPEP, and maintaining satisfactory work
performance during the respective crop year measured against the
measurement standards established under subsection (a)(2)(A).

(G)

In addition, the loss adjuster is considered to maintain satisfactory
work performance if the results of reviews to respond to producer

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complaints, State Departments of Insurance or FCIC inquiries, or
other quality control reviews identify no material errors.

(d)

Minimum Hours of Training for Agents and Loss Adjusters
(1)

(2)

In order to sell or service any eligible crop insurance contract:
(A)

A new agent or other applicable individuals (including any other
individual who solicits or otherwise promotes crop insurance sales
on behalf of the Company) must participate in a structured training
program of at least 12 hours on all of the items listed in subsection
(b)(1).

(B)

An experienced agent or other applicable individual must annually
complete at least 3 hours of structured training on updates or
changes specifically related to the items listed in subsection (b)(1),
or that are identified by FCIC or the Company as deficient during
the quality control reviews or processing of the sales related
documents.

(C)

All agents and other applicable individuals must pass a basic
competency test before they can sell or service an eligible crop
insurance contract (all testing records, including test results, shall
be maintained in accordance with section IV(g) of the Agreement)
. Basic competency tests must specifically relate to the items listed
in subsection (b)(1) and determine the proficiency of the individual
who completed the required training to sell and service eligible
crop insurance contracts. Additionally, the Company must review
the test results and document follow-up training initiatives for any
area of identified weakness on the part of any one or more
individuals.

(D)

All agents and applicable individuals must retake and pass the
basic competency test every three years.

(E)

If the agent or other applicable individual was not employed by or
did not contract with the Company in previous years, the Company
must obtain and have available upon request, documentation that
the agent or other applicable individual has passed the basic
competency test within the past 3 years with another AIP.

In order to adjust or sign any claim for any eligible crop insurance
contract:
(A)

A new loss adjuster or other applicable individual must participate
in a structured training program of at least 60 hours on all of the
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items listed in subsection (c)(1) (including at least 24 hours of
classroom training).

(B)

An experienced loss adjuster or other applicable individual must
annually complete at least 16 hours of structured training
(including at least 8 hours of classroom training), on updates or
changes specifically related to the areas listed in subsections (c)(1)
or that are identified by FCIC or the Company as deficient during
the quality control reviews or processing of the sales related
documents.

(C)

All loss adjusters and other applicable individuals must pass a
basic competency test (all testing records, including test results,
shall be maintained in accordance with section IV(g) of the
Agreement). Basic competency tests must specifically relate to the
areas listed in subsection (c)(1) and determine the proficiency of
the individuals who completed the required training to accurately
and correctly determine the amount of the loss and verify
applicable information. Additionally, the Company must review
the test results and document follow-up training initiatives for any
area of identified weakness on the part of any one or more new
loss adjusters or experienced loss adjusters.

(D)

All loss adjusters and other applicable individuals must retake and
pass the competency test every three years.

(E)

The Company must obtain and have available upon request,
documentation for any loss adjuster or other applicable individual
that has passed the basic competency test within the past 3 years
with another AIP to fulfill the requirements of this subsection.

SECTION III. QUALITY CONTROL GUIDELINES
(a)

General Company Responsibilities
The Company is responsible for:
(1)

Establishing a system of internal controls to meet all FCIC quality control
guidelines included in this Appendix.

(2)

Conducting all quality control reviews using objective and unbiased
individuals, who were not involved in the sales, supervision of sales, or
establishment of the guarantee and did not participate in adjusting the loss
for the eligible crop insurance contract reviewed. Quality control reviews
shall be independent.
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(3)

Conducting an inspection.

(4)

Implementing procedures for timely detection and reporting of suspected
misrepresentation, fraud, waste, or abuse by policyholders, employees or
affiliates relating to the Federal crop insurance program.

(5)

Notifying FCIC of suspected misrepresentation, fraud, waste or abuse in
accordance with section IV of this Appendix and assisting FCIC in
subsequent investigations.

(6)

Implementing administrative procedures to resolve and correct errors and
omissions identified during an inspection or review.

(7)

Correcting any errors or omissions identified during any inspection or
review.

(8)

Maintaining, in accordance with section IV(g) of the Agreement, all
documentation related to any inspection or review required by this
Appendix.

(9)

Establishing a process to respond to complaints by policyholders, the
public, or state insurance departments, or referred to the Company by
FCIC, documenting the complaint and actions taken by the Company in
response, and providing such documentation to FCIC upon request.

(10)

Ensuring that companion eligible crop insurance contracts in force for
other individuals sharing in the crop are serviced consistently. Any
Company procedure for ensuring such consistency shall include a
mechanism for seeking an interpretation of policy or procedure from FCIC
in the event that the Company and another AIP disagree.

(11)

Taking such actions necessary to correct any non-compliance with the
Agreement.

(12)

Preparing and providing to FCIC within 20 business days of completing
each review an Electronic Quality Control Review Record (EQCRR)
detailing the results of the review in accordance with Appendix III.

(13)

Retaining all documents, in accordance with section IV(g) of the
Agreement, obtained in the course of the reviews conducted and all forms
completed by the quality control reviewer and providing such documents
to FCIC upon request. All review documentation is considered part of the
policyholder file.

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(14)

(b)

07-01-20

Submit an annual Quality Control Report, signed and certified by
Company’s Chief Financial Officer, or individual with similar
responsibilities, by April 30 following the reinsurance year, describing the
overall results of the Company’s reviews and any corrective actions taken,
and confirming the Company has performed sufficient reviews to provide
a reasonable assurance that the requirements of the Agreement have been
met.

Review Requirements
The Company is required to identify and conduct the following reviews on a
reinsurance-year basis unless otherwise specified herein and report the results to
FCIC. A review that meets the criteria for more than one review requirement will
count toward all such review requirements.
(1)

Data Mining Reviews. Unless FCIC provides specific review requirements
that are to be implemented, the Company shall conduct an inspection of
eligible crop insurance contracts for which anomalies have been identified
by FCIC. These reviews will not exceed three percent of eligible crop
insurance contracts for the reinsurance year, unless FCIC provides notice
that additional inspections are required to address specific program
integrity concerns. These reviews will include, but are not limited to,
eligible crop insurance contracts with anomalous actual production history
(APH) certifications or identified misapplication of policy or FCIC
procedures. FCIC will meet with AIPs annually to consult on the types
and scope of data mining reviews to be conducted.

(2)

Individual Policy Reviews. The Company shall conduct inspections or
monitoring programs of eligible crop insurance contracts, entities, agents,
loss adjusters, or affiliates identified by FCIC as may be determined
necessary by FCIC to protect program integrity.

(3)

Operational Reviews. These reviews are intended to ensure that the
Company’s internal controls are in place, operational, and provide
reasonable assurance that the liability and indemnities are properly
established in accordance with FCIC procedures. At its sole discretion,
FCIC may elect to require the Company to perform a Data Mining Review
in lieu of any Operational review if FCIC determines the intent of the
Operational Review may be more efficiently achieved through data
mining. FCIC will consult with AIPs on any Data Mining criteria/results
that may be used in lieu of existing Operational Review criteria in
accordance with the consultative framework established in subsection
(b)(1) above. If FCIC elects to require AIPs to perform a Data Mining
Review in lieu of an Operational Review, FCIC will a Manager’s Bulletin
or other memorandum specifying the new review criteria and procedures.

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(A)

07-01-20
Conflict of Interest Reviews: In accordance with section VI of
Appendix I, the Company shall, prior to the payment of a claim,
conduct an inspection for all eligible crop insurance contracts for
which a conflict of interest has been disclosed or otherwise been
identified as follows:
(i)

(ii)

(B)

(C)

A conflict of interest review is mandatory when the
individual making a disclosure:
(I)

Has a share in a crop insured under any eligible
crop insurance contract insured by the Company, or

(II)

Has a relative with a substantial beneficial interest
in any insurance contract insured by the Company.

An AIP discretionary review may be conducted on any
disclosure category not included in subparagraph (i) above,
as determined by the Company.

Consecutive Loss Adjuster Reviews. The Company shall conduct
an inspection of at least:
(i)

15 percent of the eligible crop insurance contracts on which
the same adjuster has signed a claim for indemnity in
three consecutive crop years for their Company; and

(ii)

15 percent of any additional eligible crop insurance
contracts, identified by FCIC, on which the same adjuster
has signed a claim for indemnity in three consecutive crop
years between multiple AIPs.

$200,000 Indemnity Reviews. The Company shall identify and
conduct an inspection on any eligible crop insurance contract with
an indemnity of $200,000 or more, where:
(i)

(ii)

For prevented planting losses:
(I)

Any single indemnity exceeding $200,000; and

(II)

Any aggregate indemnity, including claims that
were closed, and subsequent claims exceeding
$200,000.

For all other losses:
(I)

Any single indemnity exceeding $200,000; and
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(II)

(D)

Any aggregate indemnity, including claims that
were closed, and subsequent claims exceeding
$200,000.

Rainfall Index Reviews and Vegetation Index Reviews.
(i)

The Company shall perform acreage/colony report reviews
not later than 120-days after the acreage/colony reporting
date for the crop, as listed in the Special Provisions or after
an acreage adjustment is completed in the crop year as
specified in the Rainfall Index and/or Vegetation Index
Common Policies.

(ii)

Acreage/colony report reviews are required for:

(iii)

(I)

All eligible crop insurance contract receiving
indemnities for which a conflict of interest has been
reported under the Agreement;

(II)

All eligible crop insurance contracts for which a
written application for acreage reductions are made
during the insurance year; and

(III)

Not less than a 3-percent random sample for all
Rainfall Index Pasture, Rangeland, Forage and
Apiculture eligible crop insurance contracts and a 3
percent random sample for all Vegetation Index
Pasture, Rangeland, Forage eligible crop insurance
contracts with reported acreage/colonies.

Acreage/colony report reviews shall include verification of:
(I)

Actual acres (total including insured and uninsured
acres) versus insured acres;

(II)

Actual colonies versus insured colonies (colonies
can be verified by FSA or other federal or state
governmental reporting systems/requirements, tax
records, transportation invoices, purchase
agreements, bill of sales, etc.);

(III)

Insurable interest/share in the crop; and

(IV)

Insurability of the insured acreage located within
the county, and that such acreage was reported on or
before the acreage reporting date.
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(c)

07-01-20

Actual Production History (APH) Verification
The Company is required to review and verify the records used to establish the
APH for an eligible crop insurance contract in accordance with the eligible crop
insurance contract and FCIC procedures. APH record reviews are required for all
eligible crop insurance contracts reviewed under Appendix IV for which APH
forms the basis for all or part of the guarantee and shall be conducted as follows:
(1)

For the first year in which a crop is insured, review all years of records
used to support the APH to ensure the records are complete and were
reported and certified as required by FCIC procedure; and

(2)

For continuous eligible crop insurance contracts, the reviewer shall:
(i)

Review and verify the most recent year of records used to support
the APH;

(ii)

If an error or omission is identified, but when corrected would not
affect the current crop year’s premium or liability (e.g. correcting
the error or omission does not change the approved yield for the
current crop year), determine that the remaining years of records
required to be maintained by the policyholder exist;

(iii)

If an error or omission is identified in the most recent year of
records used to support the APH that, when corrected, would affect
the current crop year’s premium or liability, and prior year records
exist, conduct a review and verification of all records required to
be available for such review; and

(iv)

If records required to be available for review do not exist for any
year, apply the yield adjustment requirements in 7 C.F.R. part 400,
subpart G.

SECTION IV. REPORTING SUSPECTED MISREPRESENTATION, FRAUD, WASTE,
AND ABUSE
In all cases where the Company or its affiliates reasonably suspect misrepresentation,
fraud, waste, or abuse, the Company shall:
(a)

Immediately report such cases to FCIC;

(b)

Not take any action until the Company and FCIC have agreed to the appropriate
course, except as necessary to preserve the timely adjustment of the claim or as
otherwise authorized by FCIC procedures;
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(c)

Take any action required by FCIC and, upon completion, forward all information
and documents in the possession of the Company regarding the required action to
the appropriate FCIC compliance office for the area; and

(d)

If the Company does not find adequate evidence to support a conclusion that a
misrepresentation, fraud or waste and abuse has occurred, maintain all documents,
in accordance with section IV(g) of the Agreement, relating to the suspected
misrepresentation, fraud, waste, or abuse, and any actions taken.

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