5 December 1997

You cant stop the hail, but you can insure against it

Insurance against hail

damage to vulnerable crops

like rape is becoming more

popular. But the cost of

cover has to be set against

likely risks

HAIL insurance – growers in vulnerable areas either cant farm without it, or dismiss it as too expensive.

The availability of this type of insurance cover has grown in recent years. Even so, it is still provided by only a handful of specialist insurers.

Variations in rates between these insurers is relatively small, although farmer groups within hail risk areas can negotiate significant discounts in premiums for group business, says Nigel Wellings of insurance consultant Farmers and Mercantile.

While growers taking out hail cover are still very much in the minority, they have been joined by new recruits in the past couple of years as competition has increased for the business and the cost of cover has reduced because of lower crop values.

As with other types of insurance, there are two sides to the argument for the benefits of hail cover. The first says that as margins reduce growers can even less afford to take the risk of a crop being wiped out just before harvest. The second says that as profits fall, insurance is one of a series of costs which must be cut.

Cover can be taken at any point in the growing season, but there is usually a 10 to 14 day deferment period before the cover becomes effective, to avoid people buying insurance at short notice in times of increased risk, such as when heavy storms are forecast.

The cost of cover is rated according to the vulnerable period for the crop in question, but the cover remains effective through the whole year, says Northampton-based Mr Wellings (see table).

"The risk depends to a certain extent on the aspect of the farm as well as whether it is in a low, medium or high risk area," he says.

Hail cover can be bought as a stand-alone policy from some insurers, but others will only provide this type of cover if the farm holds a general policy with that company. Cover must be bought for the whole of the crop in question.

Rape tends to be the most commonly covered arable crop because it is prone to high levels of damage once it has been desiccated or when it is drying in the swath.

Mr Wellings suggests that those in vulnerable areas should assess the cost and benefit of cover just like any other crop variable, such as sprays.

"Look at it in relation to the value of the risk," he says. "If you pay £9000 for hail cover over 15 years, youve only got to lose 40 acres of rape once and the cover has paid for itself."

There is little scope for no claims discounts. These would only operate at about 5% discount for a three-year period with no claims. Husbandry methods are not taken into account in assessing the cost of cover.

Where hail damage occurs to an insured crop, Mr Wellings advises growers to get in touch with their insurer as soon as possible. "Ideally we need to know that day, but certainly within four days so that we can get someone out to look at the crop."

Hail insurance – typical costs for areas of varying risk

* High risk areas – Bedfordshire Cambridgeshire

Hertfordshire East Yorkshire

Kent Leicestershire

Example farm – 500 acres combinable crops in high risk area

Crop detailsTypical cost of hail cover

350 acres wheat @ 3.5t/acre

crop value £85/t

= £297.50/acre output£1.24/acre total £434

150 acres oilseed rape @ 30cwt/acre

crop value £150/t

= £225/acre output£5.50/acre total £825

* Medium risk areas – Essex Lincolnshire

Norfolk Suffolk

Example farm – 500 acres combinable crops in medium risk area

Crop detailsTypical cost of hail cover

350 acres wheat @ 3.5t/acre

crop value £85/t

= £297/acre output £1.08/acre total £378

150 acres oilseed rape @ 30cwt/acre

crop value £150/t

= £225/acre output £4.81/acre total £721.50

* Low risk – all other areas

Example farm – 500 acres combinable crops, Hampshire

Crop details Typical cost of hail cover

350 acres wheat @ 3t/acre

crop value £85/t = £255/acre output 53p/acre total £185.50

150 acres oilseed rape @ 30cwt/acre

crop value £150/t = £225/acre output£ 2.75/acre total £412.50