Right now in the farm and ranch space, there’s much to keep up with.
“Farm and ranch insurance is having to adapt to changing conditions as rapidly as ag producers themselves,” says Ken Patrick, assistant vice president of the agribusiness division of Great American Insurance Group. “It’s a very interesting time to be in the industry.”
He says the pace of technological change is probably having as much impact as the technology itself.
“Drones are often the most talkedabout technological change,” he says, “and their use is certainly expanding rapidly, but large ag producers have been embracing technological advances in many other areas as well, whether it’s semi or completely automated tractors and implements, to highly sophisticated animal husbandry techniques, to urban farm factories that produce customizable flavor leafy greens in soil-less tubs. All of these advances create various coverage challenges.”
Diana Trachier, farm and ranch department manager at South & Western General Agency, says that farm equipment also has become much more sophisticated in recent years.
“Similar to automobiles, computer technology has been integrated into almost every aspect of the equipment’s operation,” she says. “This obviously has resulted in much higher insurable values carriers must consider when assessing overall exposures.”
Turning the topic to the environmental issues currently impacting farmers’ insurable exposures, Trachier says, “Those providing the food on our tables are under
pressure from many different concerns. Governmental agencies, ranging from local county officials to the EPA, are seeking to enforce regulations on almost every aspect of farming and ranching. This could put pressure on carriers to defend exposures never intended to be covered or priced for in the typical farm package policy.”
Patrick says that because the industry is experiencing more regulation all the time, there will be added costs as farmers comply.
“Unfortunately for many farmers, the market hasn’t absorbed these additional costs in the form of higher prices, and so this is just another factor that impacts the
margins farmers are trying to achieve,” he says. “From an insurance perspective, this additional environmental scrutiny does create the potential for increased liability exposures.”
And, he adds, even the latest technology can’t aid farmers in overcoming some age-old challenges.
“Despite the rapid adoption of sophisticated technology, farmers are still subject to the historic bane of farmers around the globe – the weather,” he says. “The increase in frequency of extreme weather events is having an impact on our industry, one which we probably haven’t fully realized or adapted to.”
The current economic climate is also presenting plenty of challenges for US farmers.
“Commodity prices … continue to be depressed, which puts pressure on ag producers to look for savings wherever they can find them, which in turn puts downward pressure on insurance premiums,” Patrick says.
“Given the challenges of current economic conditions, farmers often look to increase scale and efficiency in order to maintain revenue.
“Because there’s all this pressure on revenue generation,” he continues, “many of our producers are also looking for ways to bring their product closer to market – vertical integration is happening everywhere as farmers are trying to take advantage of the higher price that finished/packaged goods bring. This, in turn, is creating additional product exposures for many producers, and there can often be a steep learning curve when a producer starts to bring an ag product directly to market.”
Despite increasing industrialization of the agricultural sector, Patrick thinks there remains a heavy reliance on farm labor.
“We’re seeing signs that the future pool of farm laborers is likely shrinking. Lack of willing workers is going to impact a lot of producers, which in turn will put pressure on increasing automation.”
Trachier says that, just as has been the case in other industries, farmers and ranchers have been affected by far-reaching regulations.
“Compliance management now takes up significant resources in the agribusiness sector, and many farmers are reaching out for help,” she says. “Those insurance carriers and MGAs focused on the farm segment continue to assess how new regulations affect the exposures faced by farmers and ranchers and how they can help. For example, ranchers trying to comply with state regulations on signage related to equine exposures will find their insurance partners a valuable resource.”
Then there are those exposures that farmers (and their insurance agents) don’t immediately consider.
“It’s not new, but estate planning and taxation remains a major concern for the family farm,” Trachier says. “Retail agents are uniquely positioned to assist in this area with multiple financial tools to help finance and protect the family assets when the business is perpetuated.
“In addition, third party contractual risk identransfer is a critical issue when third parties are present at an insured’s location. Having proper hold harmless agreements with indemnification language along with certificates of insurance are essentials.”
Patrick says he thinks farmers increasingly underestimate product exposure as well.
“As many larger ag producers try to get more value for their efforts by bringing their products directly to consumers, all kinds of risk factors rise,” he says. “Putting your name on the label brings additional responsibilities that aren’t just tied to product safety – though that’s the biggest concern, as our ability to identify and locate pathogens within the food industry is growing all the time.
“A labeled product also means having to deal directly with the general public, something many farmers haven’t generally done outside of roadside stands. Consumers tend to be demanding, and this leads to a need for farmers to think about customer service issues, marketing strategies, and product placement and development – all of which place additional demand on time and resources and create additional opportunities and/or gaps for liability exposures.”