Agricultural Output Program AgOP

2. 2 Today’s Seminar PowerPoint presentation with comments by telephone Use the ‘chat’ function at left Open phones at the end

3. 3 Today’s Program What is AgOP? Output background Eligibility and classifications Coverage overview Rating concepts

4. 4 AAIS Farm Product Innovation Modular Farmowners Program Choice of dwelling form Choice of liability form (farm personal, farm commercial, CGL) Income and equipment breakdown coverage forms First standardized Farm Umbrella Program Maintain monoline Farm Properties Program

5. 5 AAIS Output Program Innovation Manufacturers output policies; “MOPs” Developed in 1950s One maintained by the TIRB, predecessor to AAIS Commercial Output Program, 1993 Added institutional and commercial uses Additional AAIS output programs Commercial Output XL Developers and Contractors Output (DOP) Agricultural Output (AgOP)

6. 6 Advantages of Output Programs Comprehensive property and marine forms Minimize potential coverage gaps Integrate inland marine terms for computers, mobile equipment, and other types of property Eliminate multiple deductibles Unique rating approach A single, integrated risk, rather than the sum of disparate exposures Deficiency points determine major loss load Loading for small loss history when deductible is less than $5,000

7. 7 Agricultural Output Program (AgOP) Provides broad property and marine coverage in one form Includes coverage for residential property Can be written on a blanket, scheduled, or combined basis Can be packaged with CGL and other coverage parts Features systematic, flexible rating procedure

8. 8 What the AgOP Provides . . . . . . to companies that write farmowners ‘Evolved” product for vertically integrated operations Product for non-farming ag risks . . . to companies that write commercial property A market segment tool with coverages, terms, and options designed for agribusinesses Alternative to modifying commercial forms

9. 9 AgOP versus Farmowners AgOP Processing operations that may not include the cultivation of crops or raising livestock Special terms for dwellings and household personal property Farmowners Farms supplying commodities for manufacturing or processing may not be eligible ‘HO-style’ forms are used to insure dwelling and household personal property

10. 10 AgOP Eligibility Buying, selling, storing agricultural products Processing or manufacturing goods from agricultural products Sale of goods or services to agricultural or agribusiness customers Farming operations supplying commodities for manufacturing or processing

11. 11 AgOP Eligibility, cont. Classifications Ag Chemical Mixing and Storing Cotton Ginning Dehydrating Plants Farm Operations Feed Lots Grain Elevators Hatcheries (Fish or Poultry) Milling - Corn, Rice, Feed, Cereal Sugar Refining

12. 12 Primary Form Agribusiness Property and Income Coverage Part Comprehensive mix of property, marine, and income coverages Dec page entries control limits for Additional coverages Coverage extensions Supplemental coverages

13. 13 Primary Form, Property Covered Open perils coverage (‘risks-not-excluded’) Building Property Personal Property (including most household personal property) Stock Coverage applies on or within 1,000 feet of a “covered location”

14. 14 Primary Form, Property Covered, cont. Buildings and personal property Blanket or scheduled coverage Values can be combined or treated separately Items may be separately scheduled and rated Stock Show separate limit(s) Blanket or scheduled coverage Items may be separately scheduled and rated

15. 15 Primary Form, Property Covered, cont. Computers and Mobile Equipment Open perils coverage Covered on a blanket or scheduled basis Coverage not linked to a described location

16. 16 Primary Form, Property Not Covered 24 classes of property are not covered Examples: Animals, Growing Crops, Fences, Jewelry, Land, Silverware, Trees Some types of property listed under Property Not Covered are covered under a Coverage Extension or a Supplemental Coverage or may be covered by endorsement

17. 17 Primary Form, Internal Limits Form AG 0100 includes terms that describe Nine additional coverages Nine coverage extensions 19 supplemental coverages Six ‘other’ coverages Dec page entries, not policy language, control . . . . . . which coverages apply, and . . . . . . the corresponding limit for each coverage.

18. 18 Primary Form, Additional Coverages Additional Coverages Consequential Loss to Stock Debris Removal Emergency Removal Emergency Removal Expense Fire Department Service Charges Glass Repair or Replacement Inventory and Appraisal Expense Pollutant Clean Up and Removal Recharge of Fire Protection Equipment

19. 19 Primary Form, Coverage Extensions Coverage Extensions Fraud or Deceit Newly Acquired Computers Newly Acquired, Constructed Buildings Newly Acquired Mobile Equipment Personal Effects Personal Property, Acquired Locations Property Away From Covered Location Stock -- Acquired Locations Trees, Shrubs, Plants, and Lawns

20. 20 Primary Form, Supplemental Coverages Supplemental Coverages Accounts Receivable Brands or Labels Expense Carrier Liability Fine Arts, Furs, Guns, Jewelry, Metals Loss of Use of Dwellings Ordinance or Law -- Increased Costs Overseas Transit or Location Property in Transit Property on Exhibition

21. 21 Primary Form, Supplemental Coverages, cont. Property Sold Under Installment Sales Plan Sales Representatives Samples Sewer Backup, Water Below the Surface Spoilage Surface Water Run-Off Tank Leakage Utility Service Interruption Valuable Papers, Research Cost Watercraft Wrongful Delivery of Liquid Property

22. 22 Primary Form, Other Coverages Coverages that do not increase applicable limits Collapse Computer Disturbance Tearing Out and Replacing Theft Damage -- Non-owned Property Electrical Breakdown -- May be limited to $1,000 Ordinance or Law -- Undamaged Parts of Building

23. 23 Primary Form, Perils Covered, Perils Excluded Open perils coverage Named perils coverage in endorsements that cover hay, livestock, and poultry Perils excluded Ordinance or Law Earth Movement or Volcanic Action* Civil Authority Nuclear Hazard Utility Failure* War Water* Terrorism*Indicates special exceptions apply 

24. 24 Primary Form, Perils Excluded, cont. Marine-style treatment for certain property Exceptions to these exclusions . . . Earth Movement/Volcanic Action Utility Failure Water . . . for these types of property Computers Mobile equipment Various supplemental coverages, including: Accts. Receivable Fine Arts, Furs, Guns, etc. Property in Transit Spoilage Valuable Papers

25. 25 Primary Form, Perils Excluded, cont. Additional exclusions and restrictions include Animals Collapse Computer Virus or Hacking Contamination or Deterioration Criminal Acts Temperature/Humidity Voluntary Parting Wear and Tear Additional standard restrictions for specific exposures

26. 26 Primary Form, Income Coverage Additional premium charge Four income options Earnings, Rents, and Extra Expense Rents and Extra Expense Earnings and Extra Expense Extra Expense Only

27. 27 Primary Form, Income Coverage Exclusions and limitations Finished stock Leases, licenses, contracts, orders Mobile equipment (various requirements) Radio and television antennas Software - 60 days or longer . . . Strikes, protests, other interference Coverage extensions - part of limit Interruption by Civil Authority - 30 Days Period of Loss Extension - Up to 90 Days Grain Storage Income Seasonal Coverage

28. 28 Primary Form, Income Coverage Additional Income Coverages Newly Acquired Locations, Earnings and Extra Expense OR Newly Acquired Locations, Extra Expense Only Supplemental Income Coverages Public Health Shutdown Dependent Locations Utility Service Interruption Contract Penalty Property In Transit, On Exhibition, or In The Custody Of Sales Representatives

29. 29 Primary Form, Valuation Triggered by dec page entries Actual Cash Value, Limited Replacement Cost Replacement Cost Stated Amount Special stock valuation terms ACV Market Price Selling Price Cash Shipping Value Point of Origin - Imported Stock Valued Seed, Foundation Seed Other, as shown on Declarations

30. 30 Primary Form, Remaining Provisions What Must Be Done In Case of Loss How Much We Pay - Dec page entries trigger . . . Peak Season Increase Inflation Protection Coinsurance Value Reporting Other Income Coverage Loss Settlement Terms Loss Payment Other Conditions

31. 31 AgOP Endorsements ‘Countrywide’ Endorsements Computer Virus and Hacking Coverage Crime Coverages - Discovery Basis Employee Fraud and Dishonesty Computer and Telecommunications Fraud Counterfeit Currency, Money Orders, Travelers Checks Forged or Altered Charge, Credit, or Debit Card Written Instruments Forged or Altered Checks, Drafts, or Promissory Notes Money and Securities Keytrol Fraud Functional Replacement Cost

32. 32 AgOP Endorsements, cont. Hay, Straw, and Fodder Coverage Livestock Coverage Mortgaged and Stolen Grain Coverage Poultry Coverage Pro Rata Limit Property in Transit - Condemnation or Seizure Coverage Optional Exclusions Collapse Consequential Water Loss Sprinkler Leakage; Theft Vandalism Water Damage Windstorm or Hail

33. 33 AgOP Endorsements, cont. Protective Devices and Services Rebuilding Coverage - Excess Insurance Amendment Scheduled Earthquake Coverage; Earthquake Schedule Scheduled Flood Coverage; Flood Schedule Theft Coverage - Amended Limit Waiver of Deductible - Commodities Warehouse Operators - Legal Liability Coverage; Warehouse Operators Schedule Windstorm or Hail Deductible

34. 34 AgOP Rating Information Two types of rating information Basic policy premium developed by using output methodology: Loads and Deficiency Points Premiums for many higher limits and coverage options developed by using traditional Loss Costs Company must file loss cost multiplier

35. 35 Basic Policy Premium Normal Loss Basic Charge - when deductible amount is less than $5,000 Based on losses and values over the previous three years; each loss is capped at $5,000 Maximum Normal Loss Basic Charge is 1.00; Minimum = .01 or .02, depending on deductible Basic Major Loss Load - Small loading, based on classification of the risk Deficiency Points modify Basic Major Loss Load, reflect unique aspects of risk

36. 36 Deficiency Points Deficiency points by risk characteristic Disaster Exposure Climatic Hazards Special Occupancy Hazards or Production Conditions Lack of Private Protection Inadequate Public Protection External Exposure (neighboring premises) Construction Exposures

37. 37 Deficiency Points, cont. Combustibility or Susceptibility not usual to the classification Coverage provided for property or perils usually excluded Transit exposures greater than those typically contemplated Property located in known flood areas, exposure to sewer back-up Earth movement exposures Lower deductibles on selected portions of the risk

38. 38 Property or Stock Final Factor Equals the sum of: Normal Loss Basic Charge (when applicable) Basic Major Loss Load Deficiency Point Charge The ‘PFF’ or the ‘SFF’ = Rate per $100 of insurance

39. 39 Additional AgOP Rating Info Rating higher limits and optional coverages Reflected in the assignment of deficiency points Rated as a factor of the PFF or SFF Loss costs

40. 40 AgOP Support Materials AAIS educational material, including rating Examples Excel-based rating worksheet Sample dec page format IRMI Risk Report, December 2001

41. 41 Additional Information AAIS Contact Rick Maka AAIS Director of Marketing 1745 South Naperville Road Wheaton, IL 60187-8132 rickm@AAISonline Tel. 800/564-2247, ext. 222 Fax 630/681-8356 Web: www.AAISonline.com