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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 Plan of 

Operations, in accordance with section IV(i) 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) 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.

(2) 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 livestock price 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.

(b) 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.

(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);
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(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 livestock 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) 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 subparagraph 

subsection (a)(2)(D).

(J) Contain a provision to conduct such other training that may be required 

by FCIC.
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(3) 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.

(b) Sales Training Curriculum and Requirements

(1) The sales training curriculum developed by the Company shall include those 

eligible livestock price 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 

persons proficient in:

(A) The meaning of the terms and conditions of the Basic Policies and 

applicable livestock plans of insurance and any endorsement thereto, 

Specific Coverage Endorsements, 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 livestock conditions 

and operations in the relevant area;

(D) The actuarial documents and their use;

(E) The FCIC procedures applicable to the sales and service of eligible 

livestock price insurance contracts and any changes thereto;

(F) How to properly fill out and submit all applicable forms, documents, 

notices and reports;
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(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.

(2) The Company shall ensure the following:

(A) Any new agent or other person who solicits or otherwise promotes 

livestock price 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 livestock price 

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 livestock price insurance contract (all 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 person who 

completed the required training. Additionally, the Company shall review 

the test results and document follow-up training for any deficiencies 

identified.

(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.
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(F) Proficiency is established by passing a written test meeting the standards 

of the TPEP, and maintaining satisfactory work performance during the 

respective reinsurance 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.

(c) Loss Adjustment Training Curriculum and Requirements

(1) The loss adjustment training curriculum developed by the Company shall 

include those eligible livestock price insurance contracts which the Company 

will be selling or servicing in the State, as identified by the Company in its Plan 

of Operations, in accordance with 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 persons proficient in:

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

(J);

(B) The FCIC procedures applicable to loss adjustment of eligible livestock 

price 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;

(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 individuals identified in subsection 

(c)(1) that adjust or sign any claim for any eligible livestock price 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 livestock price insurance contract.
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(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 test results 

shall be maintained by each Company in accordance with section IV.(g) 

of the Agreement) before signing any claim under an eligible livestock 

price insurance contract. Basic competency tests shall specifically relate 

to the areas listed in paragraph (1) and determine the proficiency of the 

persons 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 livestock price 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 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) In order to sell or service any eligible livestock price insurance contract:

(A) A new agent or other applicable individuals (including any other 

individual who solicits or otherwise promotes livestock price insurance 

sales on behalf of the Company) must participate in a structured training 

program of at least 3 hours for each livestock plan of insurance sold, on 

all of the items listed in subsection (b)(1).
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(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 livestock price 

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 person who completed the 

required training to sell and service eligible livestock price 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 individuals 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 person has passed the basic competency test within the 

past 3 years with another AIP.

(2) In order to adjust or sign any claim for any eligible livestock price insurance 

contract:

(A) A new loss adjuster or other applicable individual must participate in a 

structured training program of at least 3 hours for each plan of insurance 

on all of the items listed in subsection (c)(1).

(B) An experienced loss adjuster or other applicable individual must 

annually complete at least 3 hours of structured 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.
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(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 persons 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 persons 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 persons, 

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 livestock 

price insurance contract reviewed. Quality control reviews shall be 

independent.

(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.
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(7) Correcting any errors or omissions identified during any inspection or review.

(8) Maintaining, in accordance with section IV(f) 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 livestock price insurance contracts in force for 

other persons sharing in the livestock price insurance contract 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(f) 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.

(14) 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.

(b) 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.
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(1) Data Mining Reviews. Unless FCIC provides specific review requirements

that are to be implemented, the Company shall conduct an inspection of 

eligible livestock insurance contracts for which anomalies have been 

identified by FCIC. These reviews will not exceed three percent of eligible 

livestock 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 

livestock insurance contracts with anomalous underwriting or loss 

performance 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 livestock price 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.

(A) 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 livestock price insurance contracts for which a 

conflict of interest has been disclosed or otherwise been identified as 

follows:

(i) A conflict of interest review is mandatory when the person 

making a disclosure:

(I) Has a share in livestock insured under any eligible 

livestock price insurance contract insured by the 

Company, or

(II) Has a relative with a substantial beneficial interest in any 

insurance contract insured by the Company.

(ii) An AIP discretionary review may be conducted on any 

disclosure category not included in subparagraph (i) above, as 

determined by the Company.

(B) Consecutive Loss Adjuster Reviews. The Company shall conduct an 

inspection of at least:
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(i) 15 percent of the eligible livestock insurance contracts on which 

the same adjuster has signed a claim for indemnity in three 

consecutive claim years for their Company; and

(ii) 15 percent of any additional eligible livestock insurance 

contracts, identified by FCIC, on which the same adjuster 

has signed a claim for indemnity in three consecutive claim 

years between multiple AIPs.

(C) $200,000 Indemnity Reviews. The Company shall identify and 

conduct an inspection on any eligible livestock insurance contract 

with an indemnity of $200,000 or more.

(D) Simplified Claims Inspection. If the Company elects to use the 

Simplified Claims Process approved by FCIC, the Company must 

conduct inspections in accordance with procedures.

(c) Actual Production History (APH) Verification. 

The Company is required to review and verify the records used to establish the APH for 

an eligible livestock price insurance contract in accordance with the eligible livestock 

price insurance contract and FCIC procedures. APH record reviews are required for all 

eligible livestock price 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 livestock price insurance contracts, the reviewer shall:

(A) Review and verify the most recent year of records used to support the 

APH;

(B) 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;

(C) 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

(D) 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.
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SECTION IV. REPORTING SUSPECTED MISREPRESENTATION, FRAUD, WASTE, 

AND ABUSE

In all cases where the Company or its affiliates reasonably suspects 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;

(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(f) of the Agreement, relating to the suspected 

misrepresentation, fraud, waste, or abuse, and any actions taken.