Top 5 Insurance Issues for Farmers in a Soft Economy

Review Exposures, Values and Maximize Insurance Value to Ensure Satisfied Farm Customers

Thanks in part to commodity prices that are still higher than average and, thankfully, less volatile than in 2008, the agricultural economy has not yet felt the same contractions the general economy is reeling from today. That’s not to say there haven’t been some challenges, including rising costs for equipment, fuel and fertilizer. As the U.S. economy continues to struggle — along with watching the stock market and other investment results — it’s a good idea for farmers to review their insurance policies with their agents. Here are the top five items agents may want to consider.

1. How well do you understand the exposures of the farm operations?

As a farm’s profit margins are squeezed, farmers may look for ways to diversify farm income. This leads to farmers implementing new business ventures — retail, processing or agritourism — each with its own set of risks and liabilities.

Each time you visit the farm, ask about any changes — new buildings or structures, new machinery and new activities. The more information an agent has about a farm’s operations, the more he or she can enhance their role as a trusted adviser.

On the other side of that coin — how well do you understand farming and agriculture? If you insure farms or ranches of any size, you know how complex they can be. Is this an area in which you’ve developed some expertise? Do you know what to look for, or what to ask about to ensure your farm policyholders are adequately protected?

The relationship between agent and farm owner should be a partnership built on mutual trust. That’s the best way to ensure the security of the farms you insure for the long-term.

Nationwide Agribusiness will roll out a new “Certified Farm Agent” training program in 2009. The program provides in-depth education for agents who make a commitment to farms as part of their overall portfolio of protection.

2. Is the farm’s insurance up-to-date for today’s values?

It may cost more to replace steel bins or rebuild a storage barn because of today’s higher cost of materials. When is the last time you walked through the property and recalculated values for the farm’s or ranch’s assets? If the farm operation holds inventory, is that inventory insured to its true value considering commodity prices are still relatively high? Does the farmer have or need peak season coverage? If your farm policyholder has a loss and doesn’t have enough insurance coverage, it could be an unwelcome surprise weakening your credibility and effectiveness.

3. Help farmers maximize their insurance investment.

Farmers are always looking to lower input costs, including the costs of insurance. Agents should consider providing guidance on the use of deductibles, cause of loss selection, valuations and other means to control costs while still ensuring proper coverages. Helping a farmer save money on his insurance investments is a great way to gain a loyal customer, who could also become an advocate for you and your agency. Helping to prevent losses in the first place is the best way to save on insurance costs, as well as benefit your policyholders’ overall bottom lines.

4. Is the insurance company committed to the agriculture industry?

Not all insurance companies that provide farm policies take the time or make the commitment to truly understand the unique risks and exposures the agricultural industry inherently faces. Nationwide Agribusiness and other insurance companies have roots in agriculture and don’t provide farm coverage as a division of an overall commercial or personal lines focus. A dedicated farm underwriting team can provide the expertise and knowledge to augment your own. According to Doug Becker, associate director of farm underwriting for Nationwide Agribusiness, “It’s highly beneficial for farm customers if agents work with a team of trained underwriters who have developed expertise with specific aspects of farming.” Becker points out that a team approach allows an insurance company to spend time and resources understanding what’s involved, and can bring farmers innovative protection. “With knowledgeable people who know enough to ask about custom spraying or what to bring to the table when the operation hires outside employees, you have the basis for a real partnership and can get the best protection for each operation,” Becker added.

5. Is the insurance company growing, stagnant or declining?

Just as farmers should examine the financial health of their suppliers, they should take a good look at their insurance companies’ health too. If the farm experienced a large loss — for example, a $1 million tornado or animal collision liability loss — would the farm’s insurance company have the capital to stand by the policy? Insurance companies’ financial ratings should be checked by various rating agencies.

Although the farm economy may not be experiencing some of the same stresses as the national economy yet, now is a great time to get closer to your farm customers. It may be especially appropriate now to ensure you’re helping your farm customers protect the things that matter most to them!

Topics Carriers Agencies Agribusiness