Cost Control Series – Reviewing Insurance Before Renewal

back to News

Harry Edwards (FCG WhiteAvon)

This is part of a series of articles featuring cost focus and control on our clients’ farms. At times of low commodities prices, cost control is, of course, a really important area and should be seen as a cultural way to approach farming, rather than reacting to low prices by trying to slash costs.

With costs under pressure, this month’s focus is on making sure farm insurance still protects the risks that matter — without paying for cover the business no longer needs.

Why your insurance deserves a proper review aaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

Insurance is one of those farm business costs that can easily become an annual payment made on autopilot. The renewal arrives, the premium has increased, the policy is renewed and the cost gets added to the list of overheads.

With farm margins under pressure and premiums affected by higher underwriting costs across the wider insurance market, it is worth checking whether the policy still reflects the business you are running today. The objective is not simply to find the cheapest premium; it is to secure the right level of protection at the most appropriate cost.

Start with what you insure

Begin by taking the renewal documents and identifying exactly what is listed: buildings, machinery, livestock, crops, vehicles, public and employers’ liability, business interruption, legal expenses, personal accident, contracting, diversification activities and any household or personal insurance connected with the farm business.

Then ask a simple question: if you were arranging cover for the farm today, would you buy every element of the current policy again? The answer may be yes, but many policies contain items that have remained in place simply because nobody has reviewed them recently.

Where savings may be found

For many farms, the opportunity is not to cut essential protection, but to remove unnecessary cost, update outdated figures and decide which risks the business can sensibly carry itself.

  • Check that sums insured are accurate, especially for buildings, machinery and high-value equipment.
  • Review reinstatement values rather than relying on old book values or historic valuations.
  • Separate essential risks from smaller losses the business could absorb from cash reserves.
  • Consider whether a higher excess could reduce the premium without creating unacceptable exposure.
  • Remove or reduce cover on assets that are no longer central to the business.
  • Review business interruption cover so it reflects current enterprises, income and likely recovery times, this is especially important with a farm that has diversified.
  • Ensure the correct business entity is taking out the cover, especially where a new business has been created to operate a new diversified enterprise.

Do not overlook buildings, machinery and diversification.

  • Buildings: check whether each building is still used, whether its use has changed, whether it is adequately valued and whether it is involved in any diversification activity.
  • Machinery: review replacement values, theft risk, breakdown cover, machinery used away from the farm, hired or borrowed equipment and any contracting work.
  • Diversification: tell the insurer or broker before starting or expanding activities such as holiday accommodation, events, farm shops, food production, storage, workshops, renewable energy, camping or commercial lets.
  • Liability: be careful not to reduce public, product or employers’ liability cover simply to save a small amount on premium.

Use risk management to improve your position

Insurance premiums reflect risk, so reducing the likelihood of a claim can be just as important as negotiating the renewal price. Measures such as improved security, CCTV, alarms, machinery tracking, fire prevention, electrical inspections, safe fuel and chemical storage, regular maintenance, staff training and clear farm safety procedures can all support a stronger risk profile.

Risk management should be viewed as part of the farm’s wider financial management. Reducing the chance of a major loss protects the business directly and may also help when cover is reviewed with insurers or brokers.

Compare quotes on a like-for-like basis

Shopping around is sensible, but only if quotations are properly comparable. A lower premium may not be better value if it comes with higher excesses, lower sums insured, more exclusions, reduced business interruption cover or weaker claims support.

Allow enough time before renewal for reputable agricultural brokers or insurers to review the farm properly. The premium should only become the deciding factor once the cover, limits, excesses and exclusions have been compared on the same basis.

An annual farm insurance audit aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

Before renewal, ask five questions for every policy or section of cover:

  • What did we pay? Record the premium, fees and any additional costs.
  • What are we insured for? List the actual covers, limits, excesses and exclusions.
  • What risk does this protect us against? Understand the possible financial impact if the cover was removed.
  • Has anything changed? Review machinery, buildings, employees, enterprises, diversification, livestock numbers, contracting and turnover.
  • Would we buy this cover again today? If the answer is no, investigate why before renewing.

The bottom line

The aim is to reduce unnecessary insurance expenditure, not necessary insurance protection. A regular review helps ensure the policy reflects the farm as it operates today, protects against the losses that would really hurt the business and avoids paying for cover that no longer adds value.

Next step: set aside time before renewal to check the schedule, update valuations, review any changes in the business and compare like-for-like cover. The cheapest policy is not always the best result; the right policy is one that protects the business properly at a sensible cost. On a recent review of farm policies for a client, we were able to achieve a 35% reduction in premium cost whilst providing increased cover.

If you would like further information or wish to get in touch, please contact Harry Edwards at harryedwards@fcgagric.com or your local FCG Office.

Categories