Premiums for arable businesses are fairly stable, but insurance still needs to be reviewed to make sure the right cover and risk levels are in place.

An annual review should be carried out by insurance providers, who have a duty to check that products meet the needs of the customer.

In addition, putting your insurance business out to tender every three to five years can produce a more thorough review process and get the best value.

The tender process:

• Send a copy of your existing policy documents showing types and levels of cover, but with premium figures blanked out
• Ask insurers to tender on a like-for-like basis to make it easier to compare premiums
• Some insurers do not offer identical cover levels, so ask for differences to be highlighted
• Ask also for recommendations on areas and levels of cover

Paul Allen
Land and business partner
Bidwells

See also: Business Clinic – contract farming insurance advice

When initial tenders are received, invite preferred tenderers to separate farm meetings – this is a chance to meet the individual, see how you get along and how proactive their advice is.

Premium

The level of premium is only one element of insurance – like any product, the cheapest premium is not always the best. 

Unfortunately you often don’t find out how good your insurance is until you claim, so it is important to also research the track record of both broker and insurer in claims handling.

Ask other customers what their experience has been, also which loss adjusters are used and for evidence of how recent claims were handled.

Levels of cover and risk

Insurance is not meant to cover every eventuality or financial loss – it is about risk management. So you need to decide how much to self-insure, ie how much risk you want to take on your own account.

Some traditional estates self-insure to a large extent, but most arable farms would not want that level of risk.

However they may, for example, want to take the risk on certain pieces of older kit such as a much-used quad bike.

Being a common target for theft, these can be expensive to cover and the risk on an older machine could in some cases be managed by vigilant use and storage.

Discuss this with your insurance broker/provider and review it annually. 

Volatile commodity prices make it increasingly important to check the basis on which the value of crops is covered.

There is usually a 30% tolerance in values to allow for price and crop movement, but fluctuations in yield and price mean this can easily be breached. 

Excess levels should also be discussed and agreed. From my experience, increasing the excess tends not to have a significant premium saving.

Insurers tend to look at frequency rather than size of claims, so be careful about making lots of small claims which will affect your claims history, leading to higher premiums the following year. 

Specific areas of cover

Hail can destroy an oilseed rape crop, so insurance should be considered, although with prices well down, many growers are less inclined to cover the crop unless they are in a high-risk area.

It is worthwhile obtaining a quote each year, even if you decide not to go ahead but to take the risk on your own account.

Pollution insurance is an area that warrants further discussion, following legislative changes and case law.

Diesel leakage from old, unbunded tanks can cause real problems. If the tank bursts and causes pollution, clean-up costs on third-party land are covered under public liability insurance. 

However, clean-up costs on your own land are not covered as standard, although specific cover can be added for this to deal with a leak/burst from a single event.

If the pollution is caused by long-term slow seepage from the tank or a pipe, then this is not normally covered unless additional environmental cover has been taken.

Long-term insurance contracts

In most instances a long-term relationship with an insurer is recommended, rather than frequent changes. 

This builds loyalty and means you will tend to be treated more fairly in the event of a claim, particularly should something fall into a grey area. 

Also, this minimises the risk of something being overlooked when your insurer changes. 

However formal long-term agreements with insurers are less common than they used to be, and unless a significant discount is offered for signing up to it they are probably not worthwhile.

They effectively commit you to an insurer for a period (usually three years), but does not help the customer in a rising market, as insurers can still raise premiums.

You could then choose to break the agreement and insure elsewhere, but in a falling market you may end up locked into a higher premium.

How to reduce your claims

In addition to relying on insurance, think about your own risk management to try and reduce frequency and size of claims.

On arable farms these include:

• Vehicle theft – still one of the most frequent types of claim, particularly for quad bikes and other small vehicles, but also large tractors. Try to deter theft by storing vehicles in secure areas and having them data tagged.
• Fuel theft – the consequential damage is usually more significant than loss of fuel when fuel tanks are punctured to steal fuel and then left to drain on to surrounding ground. Ensure all yard tanks are bunded. If machinery is left parked overnight, particularly combines, do not leave it close to a watercourse.
• Fire – keep stacks of large straw bales in separate locations wherever possible. Make sure that it is part of a regular routine to blow dust off combines and other harvest machines at least daily to avoid fire should a bearing fail.
• If a critical implement such as a combine is fire damaged, make sure your insurance covers the cost of hiring a replacement. 
• Overhead cables – machinery just keeps getting bigger, so keep this in mind when planning work, especially on new land, and make sure staff are aware of heights, reaches and emergency procedures.
• Overnight parking – if leaving equipment in fields overnight, it is generally lower risk to park them close to houses where any attempt to vandalise or remove them would be more likely to be noticed.
• Contract farming – with this increasing, consider liability insurance for losses caused to others, for example a crop loss claim caused by spraying the wrong chemical and damaging a crop. This should also cover incidents such as a stewardship margin being ploughed in error, leading to the landowner farmer losing a subsidy payment.
• Flooding – you may be covered for certain aspects of flooding as standard but beware: does this extend for example to stored grain? It is not unheard of for grain stores to flood and while any resulting damage to the building might be covered, the crop in store is often not covered.

Paul Allen is a land and business partner at Bidwells and is also involved in his family’s arable and beef farm in Oxfordshire.