The growing and evolving agribusiness insurance market
Separate from crop insurance, agribusiness coverage is increasingly in demand to protect other food-chain assets.
In a rapidly changing agricultural environment where producers are at the mercy of a myriad of potential threats — from Mother Nature or market fluctuations to logistical issues — more agribusiness entities are investing in ways to protect their assets.
Agribusiness insurance is key to this asset protection.
“Insurance companies consider agribusiness to be the growing side of the business,” says Peter Johnson, managing director, Alliant Agribusiness, which covers a broad spectrum that includes crop insurance, farmers, growers, pickers and shippers all the way through food and beverage processors, transportation, shipping, cold storage, logistics and related industries. Alliant Agribusiness markets to individual segments, whether it’s the protein, leafy green or grain and seed segment.
As Johnson pointed out, agribusiness insurance has evolved in recent years. Formerly, agribusiness was serviced by smaller mutual companies, less national players, and as a result tended to be priced extremely low at a non-sustainable level.
“As the losses have mounted in the agribusiness space, small mutuals don’t have the balance sheet or the capital strength to handle those kinds of losses,” Johnson says. “And as a result, they’ve withdrawn from the agribusiness space. Now we see the trend is more national players, group captives and single cell captives to provide insurance solutions for the agribusiness segment.”
Luke Sandrock, CIC, is an insurance agent at the Cornerstone Agency Inc., and a Trusted Choice independent agent. He says that farmers and ranchers are his primary clients.
“If you’re raising something that will ultimately be sold, processed, or eaten by someone else, you have an exposure. It’s estimated that crop Insurance alone protects approximately $194 billion worth of crops and livestock,” Sandrock says. However, agribusiness insurance can apply whether you’re a farmer that has 30,000 acres of corn, or someone that has a beehive and sells honey at a local market.
At its core, agribusiness insurance planning is focused on risk management and loss control. That’s why Johnson advises for risk management, producers make sure their business is taking advantage of current risk management concepts and focusing on the best practices in the industry.
“For risk mitigation, producers and others in the agricultural industry should have state-of-the-art elements available in their business, both on the property protection side as well as loss control, which is more focused on life safety and protection, product protection practices, abiding by the Food Safety Act, taking care of their responsibilities as a producer, etc.,” Johnson says. “When they combine all those elements, they also must look at the contractual ability to protect themselves through strong, protective language indemnity agreements and protections provided by insurance policies.”
“Agribusiness is mainly priced on an account-by-account basis, by taking a five-year loss assessment as well as industry trends based on specific CAT losses,” Johnson says. “Agribusiness insurance was traditionally priced as a basket of risk. Now, more carriers view each individual account on its own merits and best practices.”
Sandrock added that crop insurance, or insurance that protects the physical crop/livestock, generally fluctuates with the value of the covered commodity.
“The property and casualty portion has been impacted by the hard market and faces similar challenges that we see in the personal and commercial lines industry,” Sandrock says.
Looking ahead
Insurance experts agree that agribusiness is essential, and it’s an extremely strong segment. As Johnson stressed, agribusiness is part of our national security considerations because the population must have food.
“There is an ebb and flow to when losses happen, and when claims rise and fall, premiums follow those trends,” Johnson says. “Currently, we are in a period where the claims trends have been up across the board, whether it’s on casualty claims or property side. However, the future of the segment is solid and it’s certain we will need to have an insurance solution for future agricultural business. Whether it’s processing, growers, shippers, packers, farm labor — any one of many segments — they will need insurance to continue to produce their products.
According to Chantal Roberts, CPCU, AIC, RPA, ITP, insurance claims expert at CMR Consulting and author of Once Upon a Claim, the agribusiness insurance industry has evolved to encompass hemp, and it has had to evolve to determine whether insurance carriers want to cover “agri-tainment” and other types of liability exposures.
“More and more farmers look to supplement their incomes by inviting the public onto the farm through pick-your-own-produce, hayrides, or farm-to-table events,” Roberts says. “An unendorsed, standard farm property and liability policies exclude ‘agri-tainment.’” As such, Roberts advised that insurance professionals should pay attention to agribusiness and cannabis.
“Cannabis (marijuana) is different from hemp. There are standard farm policies that provide coverage. Federal crop insurance does not include agri-tainment as a covered cause of loss for hemp; and there is no federal crop insurance coverage for marijuana,” Roberts says.
In addition to the continuous evolution of the agricultural industry, Johnson advised that insurance professionals should pay attention to extreme weather events, climate change and changing regulations.
“We’re in a period now where there’s more regulation than ever before. We must understand the regulations that impact clients, how weather impacts clients and the current claims trends that are driving the insurance company contract side,” Johnson says. “Specifically, as specialized agribusiness insurance brokers, we must have a comprehensive understanding of the industry segment to provide solid solutions to clients.”
Sandrock pointed out that it’s guaranteed the food production industry will continue to evolve. “Heavier reliance on technology can be great for efficiency and reducing the “human error” factor,” Sandrock says. “However, it can open the gates for small problems to compound quickly.”
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