The most persistent risk facing Canadian farms is not a peril that shows up in a storm forecast, but the slow gap that opens between what a farm is insured for and what it would actually cost to rebuild, according to Stacey Mills (pictured), vice-president, commercial lines, mid-market at Wawanesa.
Mills said the farm risk landscape has grown steadily more dangerous on several fronts. Climate volatility has hit farms harder than most segments, she said, and consolidation has turned many operations into large, complex commercial enterprises. Technology is the fourth force: as farms are pushed to produce more, they have had to invest in it to stay competitive, in a way Mills said was rare even 20 years ago. But the risk that troubles her most is the one that has not changed at all. "Something that has not changed in the landscape is valuation," she said.
The problem, she said, is one of pace. Replacement costs are climbing faster than farm owners revisit the numbers on their policies – inflation, as Mills put it, is outpacing how quickly members stop to ask what it would now cost to replace a given piece of equipment. And the exposure runs well beyond machinery. A valuation has to account for the full cost of putting a damaged operation back together, she said, at today's prices and today's timelines.
She framed it through a loss most farmers can picture. "Our roof blew off in a windstorm. How long is it going to take us to rebuild this dairy barn? How much is that going to cost?" Mills said. The answer increasingly depends on factors outside the farm gate. Modern agricultural buildings and equipment have grown more specialized, she noted, often requiring custom construction, specialized contractors and longer lead times – factors that can push replacement costs well beyond general inflation alone.
The exposure is not only physical. Those same extended timelines can interrupt production and revenue while an operation is put back together, which makes the operational impact of a major loss as important to weigh as the replacement cost itself when setting coverage.
That climbing quantum is what makes the perils farms already face more costly to absorb. Wind and hail are the most common across farm portfolios, Mills said, with floods and wildfires close behind, and the mix shifts by province. Wawanesa's large Western Canadian book has been tested by recent wind and hail storms, she said, with claims staff working to get members operating again – but every one of those losses is settled against a valuation that may have been set before costs ran up.
Closing the gap, Mills said, is not something an insurer can do alone, which is why she puts brokers at the centre of it. "We rely on brokers to work with our insureds and members to really talk them through that process," she said. "The role of a broker is critical in terms of working with insureds to determine the right valuation for their risk."
The stakes show up only at the worst possible moment, she said – when a claim lands and the limit turns out to be short. Mills described the conversation she most wants to prevent: an owner learning that the barn will cost $5 million to rebuild, while the policy covers only $3 million. The goal, she said, is to take that surprise out of the equation before it ever happens. "No one wins when there's been a loss, no one does."
Mills said the fix is not complicated in concept, only in discipline: keeping insured values current through ongoing education and dialogue between members, brokers and insurers, so the potential for surprise is reduced before a claim ever arrives. The principle is old, she acknowledged, but it has never been harder to keep up with. "That is not a new issue, but it is the one that plagues us as an insurance industry," she said.
What changed the math, she said, was the inflationary surge that followed the pandemic, which reset rebuild costs across every category of property and has not let go. The cost of rebuilding a house today against what it cost a decade ago, she said, translates directly to farms and to every other kind of risk. Asked what the farm insurance market most needs to get right as it grows more complex, Mills did not hesitate to reduce it to its essence.
"If I were to answer it in one word – insurance to value," she said. "Making sure we get that right."
