Renewing your farm insurance without an Independent on-farm renewal review is akin to gambling with the premium you’ll pay.
What is an on-farm review?
An on-farm review is a thorough assessment of all of your insurable assets – we consider the value of machinery, crops, livestock and buildings & contents and their associated risks so that we can advise on the differing covers and benefits available from multiple insurers. (Please note: where valuations are bespoke i.e. non-farm insurance related as with listed buildings we may advise a valuation should be conducted by a specialist in that area).
Most farming or farm related businesses are complex and principally misunderstood by the commercial insurance market, you might therefore be sceptical about having someone advise you about your business needs. That is why you should only use an independent farm insurance specialist.
Conducting on-farm reviews is a benefit that we provide to 95% of our clients year-on-year because it is the only way to ensure we truly understand our client’s needs – even if they have been with us for many many years, every year is different and all changes need to be taken into account in order that we provide an accurate presentation to insurers, the time spent with your broker also allows for clear communication and exchange of information, by no means least of all so that you comply with the terms of Full Disclosure.
What is Full Disclosure?
The principle that accurate and complete information that could influence an insurer’s decision over premium to be charged or indeed acceptability must be made. Without which all cover may be deemed null and void and the ability to purchase insurance thereafter refused. Claims are often “thrown out” because insurers were not aware of some fact they should have been. For example, changes in business activity; changes in a tenants activity; even a speeding conviction obtained since last renewal. Your annual renewal review must address these changes to keep your cover valid.
Why do you need an on-farm review?
A thorough review will bring to light all of the necessary information needed to arrange the cover that accurately reflects your risk, this will ensure that you only pay for cover where it’s needed. Believe it or not, when we are asked to review a new farm, we see too many policies where the farmer is paying for the same cover twice or paying to cover a non-existing risk to their business!
Farming does not fit into the mainstream insurance sector; covering risks versus potential losses within the agricultural sector requires unique training and one that must be completed by a specialist and preferably on-site.
Reviewing machinery values.
One of our clients had to claim for his 4 year old combine during 2008’s harvest. Prior to his annual review we had moved his sum insured on the vehicle from £85,000 up to £110,000 to reflect the increase in second hand values. His settlement paid out was £106,000. Had we not have increased his value on that machine he would have been £21,000 out of pocket! One of his first comments on the weekend it happened was how very grateful he was to have been properly insured.
Setting machinery values is an area where you need specialist advice. Without it you risk losing out when a major claim occurs.
Being Under or Over Insured is a problem.
Over the last 18 months we have experienced price volatility like never before with huge swings in the price of cereals, oilseeds, beef, lamb, fertiliser etc. It is essential that your insurance advisor has knowledge of these commodity prices in order to advise you correctly.
Without thoroughly reviewing your insurances annually you could be left vastly under-insured or over-insured.
- Under-insurance means that in the event of a claim only a percentage of the claim is paid out.
- Over-insurance means you pay for cover not required.
What is the most likely reason a claim would not be paid by all insurers?
Full disclosure has not been adhered to – where insurers are not informed of both current and previous insurance related information. Secondly – you were simply not covered, 2 - 3 hours a year to make sure that you and your broker have discussed and agreed cover is something that our clients know to be time very well spent!
At the end of the day it’s not about money but service, you could be paying too much or too little, quite frankly neither of those facts will help you in the event of a claim, if the service and cover you receive are not right the premium you paid becomes irrelevant.
A farmer in the south of England rang Farmers & Mercantile in the Spring of 2008 as he had “almost literally” had his fingers burned over his insurance arrangements. He had let out an ordinary farm building to a tenant who was manufacturing bio diesel, albeit on a small scale. The tenant’s activity was disclosed to the insurer at the time, and was accepted. Later that year, the building was the subject of an arson attack and was burned to the ground. The tenant lost all his business equipment & stock, not that this was of particular concern to the farmer. What was of concern was the inadequate sum insured for the building. His previous insurer did little more each renewal than drink coffee and pick up the cheque.
The sum insured on the building concerned was £75,000, but as there was a considerable asbestos content this figure did not reflect the escalating cost of disposing of such material legally. As a result, it was deemed by the insurer that the sum insured should have been £110,000. So he was only 68% insured, which meant they would only pay 68% of his claim. To compound matters, the local authority planning office deemed the use of the building as “commercial” not farming, so they insisted that when it was rebuilt that is was put back to commercial specification. This meant composite panels, roller shutters etc. The actual cost of the rebuild was £135,000. The farmer had to meet the cost of the shortfall in the insurance sum insured and the addition cost of construction himself. The whole incident cost him £55,000. To add insult to injury, his insurer then decided they did not wish to insure the new building because it was made with composite panels…
He rang Farmers & Mercantile who visited the farm within 48 hours, re-valued every single building on the farm, uplifted his cover by over £500,000 and still showed a premium saving, albeit modest. He now sleeps at night…