A unique opportunity to acquire new business is opening up for brokers as farmers are being forced to examine their costs. Long perceived to be a complicated market, David Murray Wells, managing director of Agricultural Insurance Underwriting Agencies, looks at how brokers can get best results from this sector.
Over the telephone recently, a broker was heard to remark "My quotation was £1,000 less than renewal terms, but they just matched my price and I got nowhere."
In a sentence, this probably defines the hopes and fears of brokers who wish to enter the farm insurance market. On the one hand, farmers are interesting prospects as they may have been overcharged for many years, while on the other hand, there is a certain lack of confidence from brokers and a perception that the opposition is tough. Farm insurance, however, need not be complicated and business can be readily acquired with the right support.
The farm insurance market is currently dominated by the NFU Mutual, which has over 60% of the market and is represented throughout the country by a network of 600 group secretaries. These group secretaries perform a dual role of insurance account executives and a direct link between farmers and the NFU, which is effectively a trade organisation. Farmers look to group secretaries for support on many issues in addition to insurance and therefore often develop a good relationship with them.
However, many farmers do use the traditional broker market and it is likely that this will become an increasing trend.
It is also probably worth mentioning that farmers have suffered a dramatic fall in incomes during the last three years. Since 1996, the price of many commodities has fallen by half, and farmers are being forced to examine their cost structure very carefully. Although it is certainly true that this is an industry in which loyalties die hard and change is slow, circumstances have forced a rather more aggressive approach towards all inputs. This includes insurance and farmers are now readily prepared to consider alternative quotations when, in the past, they may have stuck to their traditional insurer.
It is certainly true to say that farmers do not really wish to change insurers and are probably seeking an alternative quote in order to reduce premiums on their existing policy rather than extend policy cover or for enhanced service. It is therefore very important to consider this challenge at the outset and seek a commitment to change if the overall package shows significant improvements. After all, both broker and insurer will be involved in a huge amount of work in delivering the quotation and this will be wasted if the farmer simply reverts to his original insurer.
Training is vital
Training is therefore crucially important, so that brokers can convince farmers of technical support and approach each new case in a methodical manner. Some insurers, like Agricultural Insurance Underwriting Agencies, offer regular training seminars during which brokers gain an in-depth appraisal of farm insurance, marketing and ways to win business. It is possible to subscribe to agricultural journals, like Farmers Weekly, and demonstrate to prospective clients an understanding of farming and current conditions. Brokers should acquire the confidence to discuss insurance arrangements with farmers and to win business on other criteria than price. For instance, some insurers can offer cover against price/yield volatility, machinery breakdown, critical period illness and loss of revenue, all of which may not be available from traditional markets.
The first step is to gain access to the farm gate by all means at your disposal. This means trawling your computer system for farmers already on the books, approaching solicitors and accountants for introductions, advertising in local journals and possibly attending local farm shows. Mail shots can prove successful, especially if they are followed up by telephone calls. Finally, your existing clients may be able to make recommendations.
Having gained an interview with the farmer, this is the moment to establish a commitment and build a relationship. Remember that the client probably does not want to change – he is just looking for a lever to reduce premium from his existing insurer. In fact, it can be argued that the quotation will be wasted unless such commitment is acquired. Make sure that you start from scratch by measuring the buildings, calculating sums insured and physically inspecting the risk. Previous insurance schedules should be discarded and full advantage taken of improved policy cover mentioned above. Be aware that farmers are country people and will probably relate better to a tweed jacket rather than a suit.
Prove the advantage
Some brokers succeed by submitting a glossy report including photographs, building plans, risk improvements and recommendations for change. The aim is to put farmers under a moral obligation to change insurers if significant advantages can be proved. Make sure you establish a close relationship with the client and be prepared to return next year when that seed of doubt may have matured. Discuss your ability to access many markets and your experience in placing insurance.
Farmers are being forced to examine costs and brokers are now being presented with a unique opportunity to acquire business. Specialist underwriters can offer highly competitive premiums and cover which is often superior to traditional markets. The time is right to enter the farm insurance market and to establish a portfolio of loyal clients.