News Column

RMA director retires after influential career

July 7, 2014

By Mikkel Pates, Agweek Magazine

July 07--BILLINGS, Mont. -- Doug Hagel might not be a household name, but his behind-the-scenes work has touched every farm and most ranches in the Dakotas and Montana in the past 20 years.

Hagel, 63, spent his last day at work on June 30, in Billings, Mont. As the regional director for the U.S. Department of Agriculture'sRisk Management Agency, he was the region's top crop insurance official through a historic policy shift in which Congress beefed up crop insurance to become much of the federal government's safety net. His region covers North Dakota, South Dakota, Montana and Wyoming.

Under his tenure, farmers in the region went from 60 percent crop insurance coverage to 70 and 75 percent levels. Many today are buying up to 80 to 85 percent coverage, but are covering optional units of individual crops by county.

Hagel says crop insurance has become increasingly important as the prairie pothole region -- a wide band of land from central North Dakota down to Iowa -- has become a riskier agricultural climate since it started getting wetter in 1993.

Big changes

If all the protections Hagel has helped implement had been in place 20 years ago, he might still be farming.

He grew up on a small grain and cattle farm south of Rugby, N.D. Then he got a business degree at Minot State University.

After brief stints in accounting and retailing, he returned to farm with his father in 1978. He bought the farm in 1980 and added land in 1982 -- a bad time to expand.

Like thousands of others, Hagel was caught in rising interest rates, plummeting crop prices and drought.

In 1984, Hagel had started working for the Federal Crop Insurance Corp., as a contracted crop adjuster. In 1988, Hagel took an FCIC claims supervisor post in Carrington, N.D., and rented out the farm on shares.

In 1991, he moved to Williston, N.D., to manage an office for Northern Crop Insurance Co., which then processed $19.5 million in federal-only crop insurance policies. In 1993, Hagel led negotiations to turn over the federal-only polices to private insurance companies and their reinsurance backers.

Hagel went to work for the FCIC in Billings in 1993, first as a branch chief working in claims procedures and policies. He was in that post in 1993 and 1994 when Congress enacted policies that would include prevented-plant coverage, rather than simply having it as an option.

In 1996, Hagel bumped up to the director's spot at the time when the FCIC was made into an agency -- the RMA -- on a level footing with the FSA and other agencies.

In 2000, the Ag Risk Protection Act raised the subsidies and farmers were able to buy up coverage from 75 to 85 percent for certain crops.

"That really drove up participation in the programs -- all the programs," Hagel says. Significantly, the act gave authority for private entities -- especially commodity organizations -- to submit applications for approval as new programs.

In the 2008 farm bill, Congress allowed FCIC board of directors to approve subsidizing up to half of the development costs of a new crop insurance program.

The regulator

Fraud is always a concern for crop insurance programs, and can give the program a black eye, as perceived by the public and policy-makers.

The RMA is often under pressure because insurance companies promote more generous policies so they can sell and earn more.

"That's where we come in as a regulator," Hagel says. "We try to have a program that's balanced in three ways -- fair to the producer, the delivery system and the taxpayers. It's a delicate balance and we try to keep that balance."

Dishonest players often require more onerous regulation, which means policy manuals are 900 pages long instead of the 200 pages they were when Hagel started with the agency.

"That makes it harder for the honest person because it makes them go through the same knothole" that was needed for the dishonest player.

The agency provides rules and procedures for figuring losses, but adjusters have to make calls in the field. Fraud cases can be pursued based on insurance records, but much of what is decided is based on oral conversations. Hagel says much of the work on fraud is handled through a compliance office in St. Paul, Minn.

In Billings, Hagel led a regional staff of seven or eight people. He says the agency would probably need 300 to 400 people to closely supervise all of the potential fraud cases. It can take up to five years to pursue a case, but by the time it's completed, the guilty party could be off to another way of cheating someone else. And the reality is that with the high amount of resources to prove fraud, the government is able to pursue cases more vigorously when they're worth more than $500,000 to $1 million.

"We work on the big fish, and unfortunately a lot of the little guys fall through the cracks,"Hagel says.

Political milestones

Looking back on his career, Hagel says a shift toward crop insurance was a political milestone in this region. It was a challenge to overcome southern state politicians who had long preferred the ad hoc disaster programs -- passed when needed, and aimed primarily at problems in the South.

Another big development was the RMA's Livestock Revenue Protection Program, which subsidizes feed and locks in futures options.

"Prices are high now, so they aren't using it so much," Hagel says.

He also is proud of the Personal Transitional Yield program, started as a pilot in 2007. It has since been expanded and is under consideration at the national level. It allows farmers to plug personal yields into all of their units to have coverage reflective of what they can actually grow for a given crop.

Former U.S. Rep. Earl Pomeroy, D-N.D., a former North Dakota insurance commissioner who was instrumental in passing crop insurance reform in Congress in the 1990s, says he worked closely with Hagel when building policies that are precursors to what is in place today. He says crop insurance companies and others often brought ideas to Congress that Hagel could see would be too generous.

"We had a lot of grand proposals thrown at us (in Congress) over the years, but some of them wouldn't work," Pomeroy says. He says Hagel's experience helped lawmakers see where there were problems in enforcement, so people could fleece the programs.

But he says Hagel was important in developing concepts that allowed farmers to be covered by not only the volume of production, but also price protection.

Pomeroy likened congressional actions on crop insurance to "surgery with a meat ax," while government officials such as Hagel need to be a surgeon with a scalpel to make them work.

Pomeroy only half-jokes that he would have liked to have seen the regional office in Bismarck instead of Billings because of the high participation in insurance programs in the Dakotas, compared with Montana.

"He did a lot of driving to meetings in North Dakota," Pomeroy says.

A farmer's insight

Pomeroy says Hagel's experience as a producer made him aware of the farmer's financial risk exposure and how important it was for a meaningful insurance policy to cover it. He says Hagel met with commodity groups to look for better coverage opportunities, but he wasn't a pushover.

"Policing against fraud was also a major component of his concerns for building a good crop insurance program," Pomeroy says.

Dale Ihry, a veteran Farm Service Agency specialist at the state office in Fargo, N.D., who has also worked across several administrations, says Hagel was especially effective because of his history as a farmer and his "feet-on-the-ground, nose-in-the-head-of-the wheat" experience.

"You have to run the program based on how Washington provides it to you in regulation and policy," he says. "You need to follow the black-and-white, but locally you have to get into the gray areas."

Ihry says Hagel was able to relay to officials in his headquarters locations in RMA -- both in Kansas City and Washington, D.C. -- how the programs fit local conditions.

Pomeroy says Hagel's work coincided with academic focus from Cole Gustafson, the former North Dakota State University agricultural economist who died in a 2012 harvest accident. He says that kind of sustained attention is what has significantly improved crop insurance.

"I think Doug's work on issues have related to some of the success we've had in North Dakota, allowing farmers enough coverage so they could move into new crops without risking everything," Pomeroy says.

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(c)2014 Agweek Magazine (Grand Forks, N.D.)

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