Read the first part of this story here.
Coverage essentials
Like agribusiness itself, he farm and ranch insurance sector continues to battle widespread misconceptions.
“It seems that the general public often knows very little about how their food is produced,” Patrick says. “I think the image in most people’s minds is still that pre-
industrial farm with two or three red barns, maybe a silo and a little white farmhouse. Most of the farmers we work with are highly sophisticated, very entrepreneurial business owners. They watch their balance sheets, often daily, just like any business manager, and they’re very good about driving efficiencies and improving production outputs.
“That said,” he continues, “farmers often underestimate the scope of a typical farm policy, not realizing that their entrepreneurial drive often creates new exposures
that may or may not be contemplated in their farm policy. Farm policies generally are not as broad as CGL forms with regard to commercial liability exposures; it’s
imperative the farmers use their insurance broker as a business advisor to ensure that they have a policy that’s expanding with their operations.”
Trachier also stresses the inadequacy of a homeowner’s policy to address all the exposures inherent to even a gentleman or hobby farm.
“Don’t expect the CPL section of a typical homeowners to respond to farming or ranching activities,” she says. A farm owner’s and homeowner’s [policy] are not the same.”
In terms of essential coverages, Patrick says that while Great American continues to write a lot of traditional farm policies, the trend is moving toward more commercialtype coverages.
“In addition to traditional property and liability coverages, all large producers should have business income, pollution, employer liability and equipment breakdown
coverages,” he says. “Given my earlier comments about product exposure, a commercial GL form is becoming a more common need as well.”
Trachier also points to other specialty coverages that can be packaged with a standard policy.
“High-value dwelling enhancements that protect against escalating building costs, foreign objects in machinery, disruption of farming operations, livestock collision
coverage, enhanced pollutant cleanup protection, equipment breakdown and identity fraud expense are a few of the coverages that can be packaged with a farm and ranch policy,” she says. “In addition, most farm MGAs offer a farm auto product and policies for unique inland marine risks like large center pivot irrigation systems.”
Patrick adds that he doesn’t see as many requests for motor truck cargo coverage as one might expect – but that doesn’t mean it’s not important. “A lot of ag producers have cargo exposures,” he says, “and there can be significant gaps in coverage without an MTC coverage form.”
He also stresses the need for equipment breakdown coverage.
“Equipment breakdown is an increasingly vital coverage that is too frequently missing; all farmers should have an EBD coverage form,” he says. “Given the pricing in the marketplace, there’s no reason to not have an umbrella either.”
In addition to assisting in finding appropriate insurance, brokers can help agribusiness clients by keeping the lines of communication open, Patrick says.
“I think the best brokers are the ones who ask a lot of questions so that they have a very good understanding of a farmer’s scope of operations,” he says. “Having more than one conversation throughout the policy term has to be a best practice; farmers are often moving quickly in their decision-making, and their insurance broker isn’t usually top of mind. Brokers have to reach out to see what new thing the farmer’s purchased or what new revenue stream they’re pursuing in order
to make sure adequate coverage is in place.”
Patrick thinks workers’ compensation is where a broker has the best opportunity to demonstrate value to a farmer.
“Most WC carriers are enthusiastic about providing safety training to employees,” he says. “Brokers can be conduits to helping farmers get the resources they need to manage this exposure.”
“Insuring farms and ranches can be a great business,” Trachier adds. “However, it is critical that retail agents understand the exposures they are attempting to address with their customers and that they work with companies and MGAs to focus on this market segment. Those that ‘dabble’ in this segment on the agent, MGA and company side can quickly end up in trouble.”
