"This has been a surprise for us," said Gene Grimsley, senior vice president of administration at Crop 1.

"Converium Insurance was the policy-issuing company that we were working with. They were our policy-issuing company and also our reinsurer. Essentially, what happened was that Converium opted not to provide the fronting company. The policy-issuing company that our company had a contract with chose not to provide the fronting relationship for Crop 1 into the future," said Mr. Grimsley.

Representatives from Converium declined to offer any comments on why their company decided not to provide the fronting relationship.

Mr. Grimsley noted that until his firm gets the contract in place for a different fronting company and all the necessary reinsurance in place, it is legally not able to provide the discount program.

"We will likely be working with a different company. But as soon as we get that accomplished, we plan to refile and hopefully have the program available in the future, in time for it to be available for the 2004 crop year," he told National Underwriter.

Crop 1's pilot program, which utilizes the Internet to save money in administrative costs, passes on the savings to farmers in the form of reduced rates, Mr. Grimsley explained.

The PDP pilot program offered crop insurance over the Web, through agents, farm cooperatives and other financial farm services at discounted rates.

But it had attracted strong criticism, especially from the Alexandria, Va.-based Independent Insurance Agents & Brokers of America, that such online sales of crop insurance will undercut agent commissions and circumvent independent agents' participation in the crop insurance delivery system.

Typically, Crop 1's rates have been up to 10 percent less than through other primary carriers. And Mr. Grimsley defended the PDP program and dismissed the criticism that it has been vulnerable to illegal rebating, anti-consumer tying arrangements and unfair marketing practices.

"Those criticisms would be inaccurate in that the program was approved by the Risk Management Agency and it has ruled and confirmed on more than one occasion that this is not illegal rebating and there are no anti-consumer tying arrangements in place, so that is in fact not an issue," he said.

He added that, while declining to give out the number of policyholders, the pilot program has been attracting "enough policyholders in seven states to be a valid test."

As for the claim that the pilot program could have hurt independent agents, Mr. Grimsley said: "I don't know if there is a good response to that. Our program is designed around some of the efficiencies we have. There are also some agents that actually contract with our company and pass on the discount to their customers."

Mr. Grimsley also emphasized that the arrangement Crop 1 has with Converium is "very much in place" for the 2003 crop year. "We will service these policies--we will pay the losses. This is a change in direction, if you will, for the 2004 crop year. It does not have any impact at all on the 2003 crop year. That's very important to note."