The early part of the year is when many dairy farmers are looking at renewing their insurance policies… and this time around, more than ever, it’s important to get it right. With between 30 and 50% of producers under-insured, Farmers & Mercantile founding director Nigel Wellings gives readers a vital insight into what questions they should be asking of their brokers.
“First of all, don’t renew as you’ve always done. It’s very easy to fall into a comfortable relationship with your broker, and just do more of the same. But a broker doing his job properly must review the farms’ needs thoroughly and, at least every second year, take the time to walk around the farm, look at the cattle, look at the buildings and look at the machinery,” he says.
“You need to get a feel for the type of farmer you’re insuring, how he looks after his cattle and his farm. You must understand where the business is going and what is planned. Yes, cost is an important element when you’re considering which company to go with, but much more important is getting the cover right.
Nigel says one of the key things to consider is whether you have business interruption cover. This is a part of the policy that covers, as it says, any interruption to your work in the event of a claim. And, with Farmers and Mercantile, there’s no limit for the sum insured… meaning the full cost of all dairy inputs (feed, bedding, straw, fertiliser and the like) is covered.
Quoting a recent example where the cover proved invaluable, Nigel talks of a dairy producer whose building where he kept his in-calf heifers burned to the ground. As a result, he couldn’t bring his next batch of heifers into his herd on time, and calculated his loss over a three-year period at £150,000.
“If he hadn’t had business interruption, none of these costs would have been covered,” he says. “We believe only between 50 and 60% of farmers have this type of cover, yet it should form a key part of what’s included. Prices have been so low in the dairy sector, gone are the days when farmers could foot part of a claim themselves. More than ever, it’s vital that insured levels are correct – farmers simply cannot afford to cover such a loss.”
A lot of producers will only consider the risk to their main buildings, the parlour and the bulk tank room, for example. While these might be built mainly from concrete and steel, a building across the yard could be wooden and, should it burn down, will have a knock-on effect on how the farm moves forward.
While up to half of the country’s farmers may be under-insured, Nigel says this is mainly because of a lack of understanding of what cover they should have, and what exactly to look for in a policy. Recently a group of dairy farmers he has insured for some time went out to quote, believed they had a better deal, and wanted the same from Farmers and Mercantile, deciding to stay with the business because of its high service levels.
“When we looked at the ‘comparative’ policy there were so many holes in it we refused to quote,” he says. “It’s important to think carefully and read the small print. Honest and detailed discussions with your broker are key.”
The most common claims are for straying livestock, when fencing is inadequate, and stock gets on to third party land and damages property. There’s also the issue of personal injury claims from walkers on footpaths that run through the farm.
Next up are hay or straw fires, with Nigel’s team advising customers to keep forage in different places on the farm… it’s all too common for all the stacks to be in the same place. That way, if there is a fire, not everything is lost at the same time. Another proactive bit of advice warns farmers to keep vehicles away from hay and straw – limiting any potential losses.
More recently product liability cover has gained in importance, with an emphasis on antibiotic contamination of milk.
“While contamination should be picked up by the tanker driver, sometimes it isn’t. The test isn’t always done quickly enough and, once the milk is in the tanker, the loss can be £7500 or more. If the same milk gets into the vat at the dairy, the loss could be £50,000 plus. Our advice would to be very vigilant here, especially when working with new, or relief, milking staff.”
So, what are Nigel’s key bits of advice for dairy farmers in 2017?
“First of all, meet with your broker at least two or three weeks prior to the renewal date on your policy, and spend enough time with him or her to have a thorough review of your whole business.
“Then make sure the broker takes a walk around the farm, sees the machinery, buildings and stock. He needs to be sure that the insured value is set at the right level, and the only way for him to do that is to see for himself.
“Finally, remember that the two to three hours you spend doing this can save you a lot of money should you be unfortunate enough to have to make a claim. It’s incredibly valuable time and, when dairy returns have been so low, and there’s less money as a buffer in the bank, no-one wants to be in a position where they end up footing part of an insurance claim.”
Farmers and Mercantile (F&M) has built a strong heritage over nearly 21 years in the insurance business, with solid backing and expertise from brokers delivering across England, Scotland and Wales from four regional offices. Some 85% of business is geared to agriculture, and all of the businesses on-farm advisors have extensive farming insurance experience, with the majority also coming from a farming background.
Choosing a broker with an understanding of the farming industry, and the complexities which arise from a farming operation, is critical to the safe and successful running of any dairy business.
“We aim to provide the most competitive premiums with the widest cover options available,” says founding director Nigel Wellings. “Over the past decade, we’ve saved farmers many millions of pounds compared to the premiums they were being charged.”