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The Changing Face of Agricultural Insurance

Posted on: 29th November 2019

H&H Insurance Brokers considers changes in the agricultural industry that will massively impact insurance requirements and suggest that “technological developments in the next 20 years will change the way our farmers farm and manage their land more than they have in the last 200.”

This was a warning given by Paul Graham, Managing Director and Max Perris, Agricultural Consultant for Crawford Agriculture, loss adjusters for the agricultural community.  This is a stark reminder of the unavoidable impact technological advances and other changes will have on the farming industry. Crucially, the reality is that traditional agri-insurance will simply not cover these, presenting a significant element of risk to those impacted.

Technology will shape the future of farming. For those involved in the agricultural industry along with associated service providers this needs to be embraced, and businesses need to ensure that they are prepared, from a farming, legislative and safe-guarding perspective.

In a presentation by Crawford to the H&H Insurance Brokers team, Max scoped the forces at work affecting the evolving insurance needs of agricultural businesses.  These prevalent issues include, to name a few:

  • Environmental factors: for example, the challenge to become carbon neutral, the rise in sea water levels in the last 100 years, and the steady rise in temperatures in the UK over the last ten years.
  • Demands such as a growing population, the demand for sustainability and the scarcity of water.
  • Consumer Trends in diet such as vegetarianism and veganism, consumers seeking best quality for a low price, awareness of food miles and the demand for locally and seasonally sourced products.
  • Political influences are a near and present danger, with Brexit bringing with it its own set of challenges and uncertainties surrounding international trade, the potential of agri-business, labour shortage and animal welfare.

Traditional farming methods are perceived by many to have a negative effect on the environment and demands will inevitably be put on the industry by governments and pressure groups to be more eco-friendly.  Added to these are the complexities that new technologies bring, and the increasing need for farms to diversity. Both hugely affect risk and thus insurance requirements.

Commenting on the ramifications on the agri-insurance industry, Paul explains how important it is to understand the changes ahead. It will no longer be a case of renewing standard insurance cover year-on-year.  It will become essential to go to a specialist broker to identify the needs and secure bespoke policies.

“The market’s traditional farm policies are unfit for purpose when it comes to agri-tech and modern farm developments. The understanding of modern agricultural practices is paramount at all stages of cover – for brokers when they are looking for new or replacing existing business; for underwriters when it comes to putting the schedule together or adapting the policy wording alongside the schedule; and most certainly for adjusters like Crawford Agriculture when they visit farmers in times of need.”

Max explains: “Agriculture is an ever changing and evolving risk. The sorts of claims we are experiencing have changed.  For example, it is not a simple case of tractor theft or breakdown, but could be instead robot theft or breakdown.  New technologies in robotics and automation are literally changing the face of how farming will be done, and innovations are coming thick and fast. Precision farming, as it is known, puts robotics, automation, sensors and mobile devices at the forefront of how things are run.

“Robots and drones are being developed to enhance farm functionality to increase profits.  It’s amazing to think that these can monitor crops, not just overhead, but they can survey every individual plant close up, to within a couple of centimetres.  They can also be used for surveying or seeding in mass numbers and weeding large scale areas.”

Robots and drones’ ability to view a wide expanse of land means that they can work as a preventative measure with potential issues being remedied before they become a potentially costly or time-consuming problem to rectify.  Early results show that these gentler aids reduce the soil being compacted from heavy machinery, reduce chemical use and fuel use and of course free up time for farmers to tend to other matters, which will positively impact the environment and improve the bottom line.

These are just a couple of examples of agri-technologies that are already catching on, but with the forward leap of technology, others will follow and will literally disrupt how things have always be done.  And as their usage grows, so will the requirement for specialist insurance cover for these changes.  Not just for damage or theft, but perhaps to cover devices that have gone off course causing potential chaos!

As well as addressing technology’s impact, farmers are also finding their farming activities being diversified, earning their livelihoods from a wide range of offerings which are again not covered by standard policies.  This can include anything from a visitor centre, a farm shop, renewable resources, fruit picking, education and courses, a wedding barn or even holiday lets or glamping on spare areas of land.  With all of these there is an element of risk and will have a potential impact on farm insurance, whether it be for public liability, accidental damage, cancellation for a service, or loss of crop – to name just a few.

Based on the increasingly diverse insurance claims that are seen, Paul concludes that this leap in innovative technologies and diversification cannot be ignored but should instead be embraced: “Farmers must remain progressive if they are to build businesses that are fit for the future.  Technological advancements and new ways of doing business are like the tide, you can’t keep it back, it will keep coming and if you are not prepared, the only place to go is under.

Experience has shown that the development of suitable insurance contracts for emerging technologies can take some time to evolve as underwriters gain an understanding of the risks involved. Care must be taken when purchasing these contracts as cover can often be inadequate with cyber insurance being good example of this.

“We therefore encourage the agricultural industry to be open-minded to advancements in the way we do things, and understand that help is out there to ensure that you are a leader in the technological revolution rather than a casualty.  Traditional policies are frankly unfit for purpose.  Bespoke and specialist insurance will be required, and help is out there.”

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