General Farm Insurance Commentary
Australia is well serviced by well regulated and financially strong insurance companies that have the ability to pay claims. Brokers and direct sellers by and large assist their clients ably with any claim and are a valuable part of the industry.
Brokers and some direct sellers are, however, typically rewarded on a commission basis and hence there is no incentive for them to attempt to reduce/manage your premium. Premiums pretty much rise each year in excess of inflation. This is explained away in the industry as due to the increasing cost of claims which is partly true but not the complete story. Shareholders will not be ignored.
SO WHAT?
Complacency extended towards your general farm insurance policy renewal is the same as not caring about the cost of any of your other significant business costs/inputs – with potentially greater consequences.
For the consumer in ag, there are several choices of insurer and the types of cover are similar. I wouldn’t say the product is completely generic but it is not far from it - this is good and bad. Good because you can rely on a similar product wherever you insure. Bad because there is little innovation in the industry and very few new entrants.
As we know, with generic products we may as well purchase on price assuming a similar level of service across the board. You will have an opinion on the level of service you receive and may be prepared to pay more for it. If you aren’t satisfied with the service you are provided OR if you have been with the same broker and insurer for over 3 years, you should be testing the market.
Testing the market will take up some time – maybe 2 days in total ie not much every three years! Allow half day as you show a prospective insurer around and half day for a presentation. If you then allowed a day to consider your options, ask questions and tidy up. Ie not a lot of your time for one of the most important parts of risk management for your business and livelihood.
COMMENTS and ACTION
1. Don’t skimp on sums insured for buildings – particularly houses.
2. Livestock producers – cover for fire is cheap. Theft cover also worth investigating.
3. Seek a higher excess on buildings and other property
4. Self insure less critical building and other property eg unused hayshed about to fall down.
5. Check everything on your list of insured items still exists!
6. Shop your farm policy via other brokers or direct sellers each three years
7. If you don’t have time/interest in reviewing your insurance – don’t ignore - outsource some assistance!
Hamish White is an independent farm business consultant specialising in banking and insurance based near Wagga Wagga.
Contact him about getting value from your insurers and bankers.
0427 833 049
hamish@hwconsulting.com.au