Author: Amy Duckworth, 07 November 2007.
Farm insurance specialist Alan Boswell Group is urging UK farmers to review their farm insurance cover as grain prices hit record levels.The past year has seen grain prices double, and one of East Anglia’s leading independent
farm insurance brokers says this is a wake-up call for farmers who may not have adequate sums insured to cover the increased value of their crops.
Director of the
farm insurance division, Ian Payter explains: "Prices have been flat for a few years so farmers may not have paid much attention to reviewing their insurance cover. Most
farm insurance policies are subject to 'average' which means if the value of corn on your premises exceeds the sum insured, a claim may be reduced proportionately. Under-insurance could impact on the Property Damage section of your insurance and possibly the Business Interruption section, which protects your revenue."
This is a complex area and professional advice is a must because no two
farm insurance policies are the same. If a mistake is made it could have severe financial consequences.
What is behind the rise in Grain Prices?
So what has led to the dramatic increase in grain prices? The answer is not straightforward, as there are a number of factors involved:
Global Climate ChangeGlobal climate change has had a massive impact on agricultural businesses. Higher than average rainfall has led to reduced yields in Western Europe, whereas some other parts of the world have suffered water shortages.
This seems to be a problem which is set to stay, as experts predict inconsistent weather events in the future. Climate change has contributed to a global shortage in grain, resulting in supplier power. This has caused grain prices to rise.
Shifts in Supply and DemandRising grain prices are not only the result of recent erratic weather patterns. There has been a shift in the supply and demand of grain, partly due to changes in China. China, the world’s largest consumer of grain, was once an exporter. But since the new millennium, China has become a net importer of grain. With increased demand in international export markets, the domestic price of grain has risen.
Demand for BiofuelsRapid expansion of biofuel production in recent years has increased competition for agricultural land therefore reducing the amount available for grain production. The opportunities for farmers to capitalise on the demand for crops for biofuel are to be welcomed but the immediate impact has been an increase in the value of grain.
Whatever the cause of the price increases, the message is clear: review the sums insured under your
farm insurance without delay and make adjustments as appropriate.
How to arrange a review of your farm insurance
Alan Boswell Group suggests farmers get professional expert advice on their
farm insurance needs and conduct a thorough review at least once a year. Some farmers are investing their additional revenue in new machinery and buildings and it’s vital that they keep their insurers informed so that adequate cover is put in place for these extra items.
Ian Payter explains the review process: "At Alan Boswell Group we appoint a dedicated Account Manager for each
farm insurance client. The Account Manager gets to know his client’s business very well and makes a visit to the farm at least once a year to conduct a detailed review of the
farm insurance requirements. If a business is undergoing a period of great change, perhaps through diversification or expansion then it may be necessary to visit more frequently. A thorough reassessment of sums insured is a vital part of any such review as it ensures that the client has the correct level of cover and equally that he is not paying for protection that is no longer required."
Alan Boswell Insurance Brokers Limited, Alan Boswell Insurance Services Limited and Alan Boswell & Company Limited are authorised and regulated by the
Financial Services Authority.
