This is a difficult time for brokers involved in farm insurance. They are well aware that farmers are facing a desperate financial crisis at present and therefore all input costs are being scrutinised very carefully. But against this background, insurers are imposing dramatic increases in motor premiums, while the NFU Mutual has recently announced a loyalty discount for its long-standing customers. How can brokers, on the one hand meet the expectations of farmers, while, on the other, carry increased rates in the face of such competition?
First of all, it should be noted that the NFU Mutual is offering a loyalty discount only to farmers who have insured with them direct for up to five years.
Consequently, this benefit is not available to policyholders who obtain their insurance through brokers. Secondly, the NFU Mutual made a large underwriting loss last year and has already announced significant rate increases for the current year. It therefore seems likely that this is a classic example of giving with one hand and taking with the other.
As the loyalty discount is being paid from accumulated funds, the underwriting book will suddenly be transformed into profitability.
Gaining an advantage
Having established that the playing field is still level, how can the balance be tilted to your advantage? Perhaps the first thing is to discuss with farmers the use of mutual funds for discounting and whether this really is an appropriate course of action.
It is possible to argue that accumulated cash should be distributed evenly throughout the membership, rather than on the basis of long-term policyholding.
Secondly, you can present the booklet recently published by Agricultural Insurance Underwriting
Agencies Ltd (AIUA) which gives a step by step guide to reducing insurance premiums without sacrificing cover.
Thirdly, financial pressures have forced many farmers to diversify their interests and to invest in other forms of activity. This is the moment when you can demonstrate your expertise and offer farmers a much wider range of insurance markets than is available elsewhere.
The further a farmer departs from traditional agricultural activities, the greater your advantage in that you can tailor the policy cover and premium to suit your client precisely.
Drop the gimmicks
Do bear in mind that farmers will not be interested in gimmicks or manipulation of figures. They will be keen to learn how they can manage risk more effectively by giving consideration to their current level of cover and the degree to which they are prepared to self-insure. For instance, insuring buildings for fire and lightning only with a £500 excess can reduce premiums by up to 40%. If your client gives serious thought to his insurance needs, he will probably reach the conclusion that major losses should be adequately insured, but may be prepared to cover minor accidents himself.
Enjoy meeting your clients
Brokers are specialists in giving advice and should use this skill when arranging a farmer's insurance schedule. It is not a question of matching covers already in place, but of offering alternative solutions to your client's insurance needs. For example, it may be possible to alter the basis of cover from material damage to revenue, thereby improving quality and price at a stroke.
Brokers should not be apprehensive at the prospect of meeting their farmer clients, but rather rejoice at the opportunity to demonstrate their expertise. Farmers desperately need your support and will welcome advice on reorganisation of their policy.
This is the year to spend more time reviewing renewals, providing a range of solutions and winning the respect of your farmer clients.