Affordable farm flood covers – are they possible?
Affordable farm flood covers – are they possible? | Insurance Business Australia
Catastrophe & Flood
Affordable farm flood covers – are they possible?
Risk mitigation and data are key
Catastrophe & Flood
By
Daniel Wood
In Australia, where flooding can be a major risk, insurance coverages for flood can be hard to find and very expensive. Some brokers say the situation for farmers seeking flood insurance is even worse, with fewer options and limited covers.
“We don’t offer flood cover for a number of reasons and I’m not aware of anyone that does in the broking market, beyond very limited coverage,” said Trent Brown (pictured above).
Brown is director of distribution for Allstate Underwriting with a team of 12 staff operating out of Perth. One of the firm’s focus areas for brokers is farm coverages. More underwriters did once offer brokers with farming clients the option of limited flood covers but these coverages, he said, are now a real challenge across the industry.
Improving data and modelling of farm risks
“Risk mitigation is obviously key,” said Brown. “But the challenge is getting the technology that will allow you to rate it accurately so you can be confident in knowing where that particular risk is on a farm.”
That’s not stopping underwriters, including Brown, from trying.
“The aim is to get to a point where we can offer that,” he said. “Our job is to go to the insurers and convince them that we’re able to write flood risk profitably at an acceptable price.”
Insurance Business asked Brown if successfully convincing insurers to back flood covers will depend on gathering enough data?
“Absolutely,” he said. “We work with actuaries on that.”
Brown said some of that data relates to the farming exposures themselves, other information is tied to the nat cat events. There’s also the broker’s commission to consider, he said.
“We’re constantly modelling to see best case and worst-case scenarios,” said Brown.
Satellite imagery is getting better
Satellite imagery has helped modelling for some years now. Brown’s firm, together with partners, is piloting some of the latest satellite image tech that can show fence lines, calculate boundary distances, differentiate between sheds and homes and even estimate replacement costs.
“There are variables there, for example whether it’s a timber frame or a metal frame, double brick, veneer or timber construction but we’re working on those so we can capture enough information to give a rough indication and then dig deeper,” he said.
There can be other complications where imagery and mapping technology can help.
“We had a farming client in the Hunter Valley and the home wasn’t actually approved by council so they didn’t even know where the home was to map it,” said Brown.
Farm homes can be very tough to insure
In fact, some brokers say it’s the farmer’s home, rather than their equipment or crops, that is now the toughest thing on a farm to insure.
Boyle said one challenge is increased rebuilding costs in remote locations. He described purchasing flood covers as “that ever-present struggle.”
Size is expensive to insure
Playing into the cost of flood risks is the sheer size of Australia’s corporate farming businesses – there’s much more to lose.
The insurance demands of these businesses, she said, can be far more complex than farming operations even a decade ago.
The broker’s importance in the farming sector
However, Brown said brokers are playing an important role in the farming sector and suggested any improvements in the availability of flood covers could depend on them.
“I think the quality of the broker is key – a broker that knows his area, knows the clients and has been to the farm to give advice,” he said. “There’s been some really good news stories in the last three or four years of brokers that have really added value.”
However, he said there’s no “silver bullet” for solving the farming flood coverage issue.
News reports say some farmers’ premiums for equipment and crops – even without flood damage coverage – have more than doubled in recent years. Some farmers are paying annual premiums of more than $100,000.
Are you a broker with farming clients? What are your thoughts on how the industry can provide more affordable flood covers? Please tell us below
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