In years gone by, New Zealand was often jokingly referred to as the land of sheep, with around 10 of them for every person. While the number of sheep has dropped in the last few years to a ratio of five to one, we are still a nation that relies heavily on our rural sector.
According to Federated Farmers, 14% of New Zealand’s population currently lives in a rural community, with agriculture, of course, being a key pillar of our economy. We were therefore keen to explore how this vital contributor to our country is faring when it comes to changing weather patterns, insurability, and what some of the key issues are when it comes to managing rural risk.
We asked five of NZbrokers’ rural specialists in different regions to share their thoughts on how our rural community is faring, and what are some of the different issues they deal with compared to brokers in our towns and cities.
When it comes to the top risks being faced out in the pastures there were a range of different issues our brokers highlighted - from the staffing challenges farms are having, to malicious damage of property, through to falling commodity prices. An area that was highly commented on, however, was around increased liability.
A raft of new regulations has raised risk for farmers including new rules around waterway fencing, greenhouse gas emissions and the number of workplace accidents happening on farms, especially those involving quad bikes and ag machinery and equipment.
Increased risk does, of course, mean a higher likelihood of claims. Suffice it to say that farmers need to consider higher limits on their liability policies to ensure there is enough to cover their defence costs alone.
As with the whole country, climate change is having a massive impact on risk and insurability. Rural areas are particularly vulnerable due to the impact adverse weather has on their ability to produce and ultimately on their income.
The Wairarapa, Hawkes Bay and deep South have a higher risk of flooding, while hailstorms are very prevalent in North Canterbury. Couple this with severe droughts in summer, and this has driven up insurance premiums considerably in the last three to five years.
The volatility of the weather does not just relate to damage to property but has long-running effects, such as the stress it puts on farming systems. For example, clients may need to switch to once-a-day milking from Christmas onwards to conserve feed, reduce costs and maintain cow health.
Motor vehicle insurance has increased for both townies and rural owners. Out in the country, it is the high cost of vehicle repairs and the cost of ag machinery, such as new tractors, which has pushed up premiums.
Motor vehicle accidents, including the likes of quad bikes, have also played a part, along with the amount of claims due to machinery damage. This can include, for example, claims on damaged tractor tyres.
Claims outside of cities also take on quite a different turn. Whilst there is the usual property and vehicle damage, as noted above, specialist knowledge is definitely required to deal with the more unique nature of rural claims. Some of the most common ones our brokers are dealing with are:
• Milking contamination.
• Powerlines coming down on farms, leading to claims for repair costs.
• Foreign objects in harvesters.
• Stock escaping with resultant damage.
• Damaged pumps.
Claims for milking contamination, for example, can be quite significant. This is especially the case if the contaminated milk is loaded into a tanker, causing the milk from neighbouring farms that has also been pumped into the same tanker, to be unusable. Recent cases have seen around $9,000 for individual milk loss and $18,000 for liability.
As brokers, we consistently face challenges no matter where we are based. From a rural perspective, there are some particular issues that have been faced, especially over the last couple of years.
• There is a shortage of underwriters offering rural insurance. With domestic insurance being a high portion of the insurance required, and the cover being quite highly priced, there is a lack of competition available to provide clients with better options.
• It has become very hard to pick up new business due to price, especially when competing with direct rural markets. Trying to offer a product that is 20% higher, based solely on service, is a tough sell in the current economic climate, and there is little discounting available.
• Underwriting has tightened up, making it harder to get cover, even for a ‘typical’ farm.
Our brokers felt that insurers could improve their game in certain areas, with some believing that rural expertise was lacking amongst certain underwriters.
The comments were that insurers need to look more at the holistic needs of farmers, develop options to make cover more affordable, and better understand rural risks, especially if they are based in the city.
There is perhaps also the opportunity for other players to enter the market to provide more competition, which would provide a better outcome for both customers and brokers.
All in all, one thing is clear: Managing rural risk and claims requires a very unique skill set, from placement through to claims, whether you are a broker or insurer.
As an insurance community, it is also important to continue to support our rural community, who contribute so much to our economy and literally help us put food on the table.
