Proving tricky to insure against costs of disease
Proving tricky to insure against costs of disease
By Marianne Curtis
DESPITE government calls for livestock producers to protect themselves against the financial consequences of movement restrictions resulting from disease outbreaks, patchy insurance availability and lack of money in the industry make this difficult.
Large financial losses sustained by producers in CSF surveillance zones and a rising number of Pig Welfare Disposal Scheme claims have prompted MAFF to set up a working party to review the impact of animal disease controls.
NFU representative on the working party, Steve Rossides, says the CSF outbreak showed that in addition to the effects of the disease itself, there are associated costs such as movement restrictions. "We are investigating ways to cover these and how other countries do it."
Insuring stock is one option, but there are difficulties, admits Mr Rossides. "The TB insurance market is fairly buoyant, but cover can be hard to obtain for producers in high risk areas. Also insurance tends to be the first thing producers cut back on when times are hard."
Cost of TB insurance varies considerably, says NFU Mutual underwriter George Stonley. "Animal disease policies cover the market value of the animal when no MAFF compensation scheme exists or an additional percentage of the MAFF payment when it does exist, to cover consequential losses." For a 150-cow dairy herd valued at £80,000, TB insurance cover for 25% of the MAFF compensation value and loss of income of up to £300 a week, as a result of movement restrictions for up to 52 weeks, costs £200 a year in the high risk south west and £40 in the low risk north east, says Mr Stonley.
But uptake of animal disease insurance in low and has changed little over the past 15-20 years, he adds. "About 15% of cattle farms insure against TB. There has been a rise in uptake in the high risk south west, whereas – due to falling incomes – producers have tended to drop cover in low risk areas."
After the recent CSF outbreak, the company does not offer insurance against it, but expects demand to be higher than before the outbreak once availability of cover resumes.
"Producers do not readily buy disease insurance unless they perceive a threat. Demand for CSF cover rose in 1997 after the Dutch outbreak, but then fell away."
However, producers with insurance cover against CSF who did not have the disease on their farms, but faced movement restrictions, fell into a grey area, says Mr Stonley.
"Producers were only covered when there was an outbreak on their farm, but when the government stepped in unexpectedly with pig welfare scheme payments this triggered the policy for units facing movement restrictions."
For wider uptake, insurance policies must become more sophisticated reflecting risk on a unit basis, believes National Pig Association regional manager Ian Campbell. "I would advise considering insurance, but there should be a range of premiums available, similar to house insurance, reflecting how much you protect yourself against risk.
"This may involve improved biosecurity and perhaps a system of no claims to reduce premiums. Even though the pig industry currently needs every penny to pay off debts, the whole area of how we protect ourselves against the cost of disease must be reviewed."
For the pig industry, Mr Campbell envisages that insurance could form part of a structure to mitigate losses, along with government aid and an industry fund.
Proposals for a Pig Industry Development Scheme fund are currently being consulted upon, initially to help compensate producers for CSF related losses. "Losses sustained by affected units went well beyond Welfare Disposal Scheme payments which amounted to a maximum of £50 a head."
The fund, when approved, aims to collect a 20p a slaughter pig levy enabling eligible producers to top up Welfare Disposal Scheme payments to a maximum of £75 a head. *
DISEASE INSURANCE
• Patchy availability.
• Consequential loss cover limited.
• Low uptake.