The Squeeze on Specialty Crop Agents: How A&O Adjustments Have Reshaped the Industry

Since 2011, the Standard Reinsurance Agreement (SRA) has imposed caps on agent commissions in federal crop insurance, fundamentally altering how Approved Insurance Providers (AIPs) compensate agents. These regulations were meant to prevent excessive compensation and rebating, but they’ve had unintended consequences—particularly for agents specializing in specialty and perennial crops like almonds, grapes, and citrus.

While overall liability in the U.S. crop insurance market has nearly doubled since 2015, growth has been concentrated in cash crops in the Midwest. Because the A&O (Administrative & Operating) subsidy adjustment factor is applied nationwide, commissions for agents selling specialty crops have been squeezed, driving down earnings and increasing volatility year-to-year.

In this post, we break down the history of A&O, the mechanics of hard and soft caps, and why these trends disproportionately impact agents focused on specialty and perennial crops.

History of the A&O in Crop Insurance

Hard and Soft Caps since 2011

Since 1996, the RMA has set premium rates for federal crop insurance policies and prevented AIPs from competing on price (premium). In order to build portfolios, AIPs historically competed on commissions offered to independent agents. This unique market structure created concerns for policymakers around 1) excessive compensation to independent agents and 2) rebating provided to indirectly compete on price for farmers’ business. To address this. the 2011 Standard Reinsurance Agreement (SRA) introduced a cap on agent compensation, specifying that:

• AIPs cannot pay more than 80% of A&O allocated to a given state as a base commission to agents (the “soft cap”).

• The remaining 20% of A&O was to be withheld and distributed as a bonus to agents if the AIP achieved profitability in that state.

• Together, the maximum distributable base commission and profit share sums to 100% of A&O (the “hard cap”).

• Total A&O funds allocated to a state must remain within that state, meaning an AIP cannot redistribute surplus A&O from one state to another.

To reduce the volatility in federal funding requirements, the 2011 SRA and subsequent SRAs established a minimum (the "cup") of approximately $1.0 billion and a maximum (the "cap") of approximately $1.3 billion per year for A&O subsidies—subject to an adjustment for inflation from 2011 to 2015. In order to implement this, the SRA introduced an adjustment factor to be determined by the RMA annually to ensure that the total A&O funding did not scale linearly with premiums. This means that as crop insurance premiums rise due to higher crop prices or increased risk, the factor decreases to solve for the A&O cap. As of 2025, the adjustment factor was ~60%. Importantly, this factor is calculated on a nationwide basis.

Since 2011…

1. Rising Liabilities and Premiums in America’s Breadbasket:

   • Corn and soybeans, the two most heavily insured crops in the U.S., have experienced increases in total liability and premium due to increased adverse weather events and increasing acreage enrolled. In 2022, 62% of farms producing row crops (cotton, corn, soybeans, wheat, peanuts, rice, and sorghum) purchased some form of federal crop insurance, compared to 9% of farms growing specialty crops, such as fruits, vegetables, and nursery crops. Overall liability in the US has increased from $100bn in 2015 to $195bn in 2022.

     

   • In terms of insured liabilities, however, in 2019 row crops accounted for 76%, while specialty crops accounted for only 14%:

     

   
   

2. Limited Premium Growth for Specialty Crops:

   • Premiums for crops such as almonds, citrus and grapes have not grown at the same rate as for corn and soybeans. Since agent commissions are calculated as a % of premium and adjusted by A&O factor, but the A&O factor is calculated on a nationwide basis, this dramatically reduces the available commission pool to agents in geographies and commodities where premiums have not grown as fast as the breadbasket of America.

3. Commissions for Agents selling Specialty Crops

   • Perennial crop agents, including those selling policies for almonds, citrus, and grapes, have been severely affected as A&O reductions have primarily been driven by row crop premiums.

   • Unlike Midwest agents whose commission structures have smoother fluctuations as premiums shift with the A&O factor, specialty crop agents experience more volatility in commissions, making it difficult to predict earnings year-over-year. Agents are selling policies without knowing their final commission rates due to shifting A&O factors.

   • Many agencies who sell exclusively specialty crops, such as those in California, have seen their earnings drop by 20-30% in the last several years.

   • If premiums for cash crops in America rise further, the A&O factor could compress agent earnings further.

   • Specialty crop agents have increasingly sought to diversify their portfolios with uncapped specialty crops (such as pistachio APH, which was introduced by AIPs after 2011 and is excluded from the SRA) to mitigate the financial uncertainty tied to federal crop insurance commission structures.

Looking Ahead: Policy Adjustments & Agent Advocacy

With the current trend, crop insurance agencies, particularly those servicing specialty and perennial crops, should advocate for changes to the SRA and A&O factor calculations. Potential solutions include:

1. Adjusting the A&O Calculation Methodology

   • Instead of a uniform reduction across all crops, introducing crop-specific A&O adjustments could ensure fairer compensation for agents servicing diverse agricultural regions.

2. Increasing USDA A&O Funding

   • Expanding the A&O funding pool beyond $1-1.3 billion would help stabilize commissions and prevent severe reductions when premiums rise.

3. More Timely Factor Announcements

   • Releasing the A&O factor earlier in the crop insurance cycle would give agents and agencies more certainty about their expected earnings.

What’s Next?

The declining A&O factor has created major challenges for specialty crop insurance agents, particularly those servicing perennial crops. With profit-share structures masking true earnings, inconsistent factor adjustments, and rising premiums compressing A&O, agents are seeing declining and volatile commissions. At Till, we are focused on helping agents adapt by providing more efficient processing, marketing and healthier commission splits, so our team can focus on serving growers. We are active members in CIPA and continue to advocate for specialty crop agents by any means we can.

Glossary

Administrative & Operating (A&O) Subsidy – Federal funds provided to Approved Insurance Providers (AIPs) to cover administrative costs of delivering crop insurance policies. A&O also determines agent commissions.

Adjustment Factor – A nationwide percentage reduction applied to A&O subsidies to ensure total federal spending remains within pre-set budget limits.

Approved Insurance Provider (AIP) – A private insurance company authorized by the USDA’s Risk Management Agency (RMA) to sell and administer federal crop insurance policies.

Caps on Agent Compensation (Hard & Soft Caps) – The soft cap limits base agent commissions to 80% of A&O, while the hard cap ensures total commissions and profit-sharing cannot exceed 100% of A&O.

Commission Volatility – Fluctuations in agent earnings caused by year-over-year changes in the A&O adjustment factor.

Liability – The total dollar value of crops insured under federal crop insurance policies. Rising liability has driven increased premium volumes in row crops like corn and soybeans.

Multi-Peril Crop Insurance (MPCI) – The primary form of federally subsidized crop insurance that protects farmers against yield and revenue losses due to weather, disease, and price volatility.

Perennial Crops – Long-lived crops like almonds, citrus, and grapes that are disproportionately impacted by declining A&O factors since their premium growth lags behind row crops.

Premium – The cost of a crop insurance policy. A percentage of the premium is used to calculate agent commissions, but declining A&O factors reduce available commission pools.

Rebating – A prohibited practice where AIPs or agents indirectly reduce premium costs for farmers to gain a competitive advantage. The 2011 SRA imposed stricter regulations to prevent rebating.

Risk Management Agency (RMA) – The division of the USDA that administers the federal crop insurance program and sets premium rates.

Row Crops – Major cash crops like corn and soybeans that dominate the U.S. crop insurance market and drive nationwide A&O adjustments.

Standard Reinsurance Agreement (SRA) – The contract between AIPs and the USDA that governs federal crop insurance, including A&O funding, agent compensation caps, and reinsurance provisions.