In the heart of North Queensland, where the agriculture and tourism rule the land, there is a storm brewing on the horizon – the relentless rise in farm insurance premiums – In some cases 20% to 40%.
With this escalating financial burden, it’s imperative for farmers to rethink their risk management strategies rather than abandoning insurance policies altogether.
The Challenge of Rising Premiums
Farm insurance premiums in North Queensland have seen a steady upward trajectory, largely due to the region’s susceptibility to extreme weather events, such as cyclones, flooding, and droughts.
Insurers, compelled by the need to balance risks and returns, have been forced to increase premiums to meet the rising costs of claims.
- The frequency and increased severity of natural disasters
- A reduction in the number of insurers in the marketplace
- Inflation affecting equipment and labour prices.
As a result, many farmers are facing a tough decision: pay increasingly hefty premiums or forgo insurance altogether. It’s a predicament that demands a thoughtful, well-informed response.
A Balanced Approach to Risk Management
Farmers must resist the temptation to cancel their insurance policies entirely, as doing so could leave them vulnerable to substantial financial losses in the event of unforeseen disasters.
Instead, they should consider a balanced approach to risk management.
Tailored Policies: Farmers should work closely with their insurance broker to create policies that suit their specific needs. Customised coverage can help mitigate risks while ensuring premiums remain affordable.
Risk Assessment: Conduct a thorough assessment of the farm’s vulnerabilities. Identify the most common and severe risks, such as cyclone damage, crop loss, or equipment damage. By understanding these risks, farmers can make informed decisions about their insurance needs.
Loss Prevention: Investing in loss prevention measures, such as improved infrastructure and better land management, can significantly reduce risks. Some insurers may offer premium discounts for proactive risk mitigation efforts.
Group Insurance: In some cases, farmers can band together in cooperatives to purchase group insurance policies. This can help reduce premiums through economies of scale.
Consolidate Policies: Over time you might have acquired separate insurance policies. It can be cost-effective to combine them into a single policy package or with the same insurer, where possible. Combining policies into a farm pack policy at a cost-effective premium.
Deductibles: Consider accepting higher deductibles in exchange for lower premiums. While this means shouldering more of the financial burden in the event of a claim, it can lead to reduced annual premiums.
Annual Review: Continuously reassess insurance needs as the farm evolves. Changes in the business, such as expanding operations or diversifying crops, may require adjustments to insurance coverage. Book one of the FREE Northern Insurance Solutions Policy Review services.
Be Cautious of Underinsurance
Underinsuring a building won’t mean you’ll receive that exact sum if it’s destroyed.
Insurers can opt to:
- Pay up to that amount for replacement or repair and you fund the shortfall
- Have you decide either to repair or replace the asset. In that case, they’ll typically pay the replacement cost minus depreciation based on the building’s condition before the loss
- Pay you the pre-damage value minus the damaged property’s value
- Offer you a cash settlement – that’s at their reasonable discretion
- Not pay you the sum insured in your policy even if you have paid a premium.
Focus on the excess you’ve selected for your most valuable assets. Increasing the amount you’ll pay if you claim allows you to reduce your premium. More importantly, get professional advice!
Review your Risk Management
Farmwork is risky.
Safe Work Australia identifies these common risks (www.safeworkaustralia.gov.au/safety-topic/industry-andbusiness/ agriculture/managing-risks)
- Manual handling, being hit by moving objects, slips, trips and falls
- Being struck by an animal, falling from a horse or an accidental shooting
- Equipment and vehicles, including auger, tractors, motorbikes and quad bikes
- Chemical use, such as pesticides, fertilisers and herbicides
- Extreme weather events
- Farmers often working alone or not having first aid closeby
- Not having mobile phone coverage.
Review your risk management and business continuity plans regularly. There might become risks you’ll decide to manage yourself with a contingency fund.
The Long-Term Benefits
By adopting a well-considered approach to risk management, farmers can safeguard their financial well-being in the face of escalating insurance premiums.
While the short-term costs may be daunting, the long-term benefits of maintaining insurance coverage are immeasurable. The peace of mind and protection against unforeseen events can be invaluable.
Moreover, responsible risk management can also serve as a powerful story to tell – one of resilience and adaptability. In the world of marketing, such narratives are invaluable, resonating with customers who appreciate businesses that prioritise sustainability and responsible practices.
Rising farm insurance premiums in North Queensland are undoubtedly a challenge for the region’s Agricultural industry. However, the solution doesn’t lie in ‘cancelling insurance policies’.
Instead, a prudent risk management approach that includes tailored policies, risk assessments, loss prevention, group insurance, deductible considerations, and annual reviews can help farmers navigate these challenges.
Working with trusted and experienced Farm Insurance Brokers like Northern Insurance Solutions will not only help to protect your livelihoods, but also build a compelling story of resilience that will see your farm secure for years to come.
Northern Insurance Can Help!
Talk to our experienced and local team in the Burdekin to gain the most knowledgeable advice about your farm insurance.
Call our Ayr office today on 07 4783 1310 and get the best value for money insurance policy.
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