Among the current global turmoil, we explore the impact on the insurance industry and what it means for UK farmers’ risk management.
Thankfully for now, main agricultural production has been relatively sheltered from the immediate impact we have seen in sectors such as hospitality and retail. As such we have not seen a huge financial strain on insurers in this sector – though plenty of enquiries to clarify policy positions.
While farm-specific demand has not greatly changed, insurers are feeling the pressure from three forces:
- Workforce disruption: establishing home-working norms is challenging in what remains a relatively high touch industry. Compounded by sickness absence, and the economy-wide reduced productivity with schools closed, we see that capacity in the insurance supply chain has been significantly impacted
- Explosion of enquiries: the global insurance industry is now facing a boom in enquiries and claims, particularly the worst hit sectors. The resulting capacity is therefore put under acute strain
- Move to a risk reduction strategy: in any economic uncertainty, insurers will reduce their appetite for taking risk (or, put another way, they consider all existing risks to have increased). As such, we may see a period where insurers retrench to work with their lowest risk customers only, and be very selective in taking on new policies
Unfortunately for the consumer, the risks above will lead to a reduction in competition for their cover. Therefore while the current disruption continues, it is likely that you may face increased costs for your cover, or even struggle to achieve the level of cover and service you require.
All is not lost – there are still some short term actions you can take to protect your business, at the most efficient cover and cost:
Scope of insurance
It is important to note that the vast majority of insurance policies will not cover losses directly resulting from government directives on Covid-19. The event classifies as 'Force Majeure', and insurance typically protects itself from such events so as to avoid catastrophic losses. Instead, the assumption is that the state will intervene in such cases – as many governments around the world have done.
In any current renewals, look first to wording on pandemics and Force Majeure clauses. Make sure you are not still excluding risks which have become very real to your business.
Value of cover
The 2020 harvest season was already set to be one of the most challenging in decades thanks to low winter cropping. This is now potentially compounded by supply chain and labour shortages through spring and summer.
As a result, we could see a dramatic change in the level of activities and value covered on farm and surrounding rural businesses, compared to assumptions made in most business plans, and therefore insurance cover.
Insurance policy pricing is largely determined by key values, many of which will be affected: business interruption (revenue); stock in store (inventory); employer liability (number of employees).
So for any businesses looking for simple costs to trim in uncertain times, you will find that a rapid review of business outcomes for the year will alter your premiums paid out in insurance.
Scanning the market
We believe competition for your policy will decrease in the short term, as insurers navigate their way through the turmoil.
We are on hand to help access a wide panel of insurers, should you need a renewal in the coming months. We are also working with insurers to digitise as much of the process as possible, to reduce their burden of data handling and therefore free up time to deal with more enquiries and more business.
If you would be interested in support to scan the market at renewal time, simply pop in your rough renewal date via the link below and we’ll contact you a few weeks ahead to run through the process.
Alternatively, if you would like to review your existing insurance set up more promptly and feel a no obligation review would be useful, please contact Rupert Harlow on 07791241 028 for a quick discussion on how we can help.
Yagro is an Appointed Representative of Scrutton Bland Insurance Services under regulation from the Financial Conduct Authority. As with all our services, we uphold to manage your data in accordance with our policy and GDPR legislation in the UK, and will not use or share your data in any way other than to deliver our services to you. We will not sell your data.
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Farm insurance is an overlooked area of cost. Getting competitive quotes at renewal time is a painful, time consuming process – often leaving premiums free to creep up over the years.