Agricultural Insurance: Products and Benefits
June 08, 2016
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Katerina Petrenko Senior Account Manager of Property Insurance Department
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There are a few insurance products in the Ukrainian market which are tailored to the needs of agricultural companies. Rational use of them all can provide the safety bag intended to offset the repercussions of unforeseen circumstances since the losses are to be covered by an insurance company.
Insurance coverage of agricultural business has long ago proven to be the best way to guarantee continuity, stability and well-balanced production for the insured companies. The principal goal of insurance is to indemnify for the partial or total losses due to sudden unfavorable events. Not only does it prevent from acute fluctuations of revenue, but also it provides easier access to the loans which in its turn drives the use of technical and technological innovations.
Property insurance in agriculture
According to the statistics agricultural property suffers from fires more often than other industrial real estateIt can cover warehouses, grain elevators, mills, farms, greenhouses and other facilities against fires, explosions, acts of God, malicious mischiefs etc. Agricultural property suffers from fires more often than other industrial real estate mostly due to the absence of up-to-date fire protection systems. Usually it is caused by the high price of these systems, though in some cases they cannot be installed due to the specifics of the manufacturing process.
Often enough the condition of the insured premises does not meet all of the fire safety requirements. Sometimes they even have wooden carcasses which are highly exposed to the fires. Grain elevators are even more dangerous in this regard as the access to the burning elements is often impeded. What is more, ventilation systems, conveyance systems, or other equipment can serve as easy ways through for the fire allowing it to spread around in seconds.
Usually the insides of the insured locations are covered by a thick layer of grain or flower dust which is prone to self-igniting or even exploding given sudden contact with air.
That is one of the reasons why it is sensible for the business owners to protect their investments by means of insurance. That is especially relevant to stocks and equipment. In Ukraine loans drive the demand for insurance in most cases. However there is a common delusion associated with insurance where a bank is named as a beneficiary. Most companies view it as the means of protecting bank’s interests rather than their own, so they rarely pay attention to the clauses and conditions of the insurance agreements choosing the insurance company based on the lowest price alone. What they don’t consider is that in case of an insured event claims settlement falls into their lap. And they have to deal with it alone. To prevent this situation make sure to at least consider few coverage options which have different set of insured perils and deductible amounts.
Should you make up your mind to insure your property think about business interruption insurance as well. It ensures indemnity not only for the physical losses but also the income not received due to the shutdown.
Crops and crop yield insurance
Agricultural companies have a wide range of insurance products to choose from. Great many of agricultural plants can be covered by insurance. Such cultures as wheat, rye, barley, oats, corn, soy beans, flax, sunflower, hop, sugar beet can be insured against ground frost, icing, winterkill, hail, wet-snow accretion, lightning, fire, earthquake, avalanche, landslide, gale, windstorm, heavy rains, flood, epiphytoty, malicious mischief etc.
There are four principle types of agricultural insurance available in the market:
Agricultural animals insurance
Not all of the agricultural animals can be covered by insurance. Only the following ones can count on the effective insurance policy. They are: cattle, goats and sheep, pics, horses, fur game, egg-laying and meat breed poultry, sporting horses and honey-bee colonies. It’s worth pointing out that apart from the regular perils transmissible diseases can also be insured. That is the key distinguishing feature which makes this insurance product unique. According to the statistics, over 30 kinds of dangerous diseases have been registered in 102 countries of the world. Death rates of some of them are pretty high. A few can even become cross-border in a short period of time resulting in multi-million losses.
This insurance product is frequently used by export-oriented agricultural companies. Shipments can be insured within the framework of the annual policy or by means of separate insurance agreement covering each particular shipment. Concluding of annual agreement is more time-consuming while it does secure more benefits in the end. Interestingly enough, insurance can stipulate for the freight and additional charges reimbursement as well let alone the indemnity for the cargo damage. Given the sharp currency exchange rate fluctuations currency clause in the agreement can also be of use.
Conclusion of the insurance agreement requires much efforts and time, however, careful consideration of its clauses in the very beginning prevents disappointment when settling claims. My recommendation is to always consider several coverage options. Besides, buying all the insurance products from one company is hardly a good idea. While the wholesale discount seems attractive at first, it has its drawbacks in the long run. First, in the view of unstable economy and specifics of national market it’s sensible to diversify risks by dividing them between several insurers. Second, each of insurance company has its own product at which it has the most expertise in comparison with others. Working with one company is bound to lower the quality of service in the end. Third, it may be problematic to terminate all the agreements at once should something go wrong in the relations with your insurer. Apart from red tape issues, you are exposed to the financial losses as well since the cost for administering the insurance agreements is equal up to 50 % depending on the insurer’s policy. This sum is always withheld by the insurance company in case of premature termination of the agreement.
In its turn, knowing all of these nuances is quite hard, so it’s best to rely on professional advice to avoid becoming a prey to circumstances.
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