Don’t get caught under-insured amid sky-high production costs and escalating personal injury awards

  • Farmers urged to check insurance values and indemnity levels

Farmers are being warned to make sure they have sufficient sums insured within their farm policies to cover for replacement input costs, given the continued substantial increase in manufactured fertiliser prices globally.

Alongside this, escalating personal injury awards also mean it is essential to check farm liability insurance, considering all risk factors.

Fertiliser prices are showing no sign of slowing down, with ammonium nitrate (AN) prices approaching £900 per tonne, compared to less than £300 per tonne a little over 16 months ago. Despite the huge hike, few farmers have considered the insurance implications.

Acres Insurance Brokers is advising farmers to check their policies, highlighting the benefits of covering replacement input costs under crop business interruption insurance.

On many more traditional farm insurance policies, fertiliser will be insured against fire, vandalism or theft, as part of produce and deadstock on the farm insurance policy. Produce and deadstock insurance requires the farmer to set the sum insured at the correct value to replace the produce or product, such as fertiliser in this example.

“Growers need to ensure the produce and deadstock sum insured is drastically increased to ensure they have full coverage for the replacement value,” says Nigel Wellings, director and insurance broker with Acres.

If not, Mr Wellings says that in the event of a claim, they will be under-insured, and insurers will only pay out a percentage of the replacement value.

The farm insurance policies sold by Acres Insurance Brokers automatically includes cover for the replacement cost of all inputs, under crop business interruption insurance.

“This means that as long as your total crop value is correctly insured, the replacement cost of all fertilisers and agrochemicals is automatically insured, with no need to increase values. This is a major advantage of this type of insurance cover in the current rising fertiliser market,” he says.

Mr Wellings also warns of the importance of getting the right advice on liability insurance, amid escalating personal injury awards.

The majority of the farm insurance market has a £10 million indemnity limit for both Public and Products Liability (PL) and Employers Liability (EL) respectively, but Mr Wellings warns that farm businesses must thoroughly review current farm liability insurances with a competent advisor, fully conversant with the farm operation, to ensure adequate cover is in place.

“The problem we have seen progressively over the last decade is that personal injury awards from the courts have been getting higher,” he says. “There are a number of cases going through the courts now, although in other industries, where the personal injury awards are likely to be between £10 million and £20 million alone.”

The consequences of having a PL or EL claim that exceeds an insurance policy indemnity limit can be devastating. Any court award over the indemnity limit can be enforced against personal assets, if trading as a sole trader or partnership, or against company assets if trading as a limited company.

Such an award against many farming businesses would be catastrophic,” says Mr Wellings.

Acres Insurance Brokers offers a simple, low-cost solution, adding a second policy for another £10 million over and above existing insurance cover. This can be bought as an “excess layer” for surprisingly little expense.

“Our advisors would work with the farm business to evaluate and identify factors that will influence requirements,” adds Mr Wellings.

“With a full and thorough review, the farm business can safe-guard against potential eventualities with a low-cost, simple solution, giving peace of mind to the farmer to concentrate on core farm activities,” he concludes.