Why your claims history may count against you
The number and value of previous claims is becoming more important to insurers.
So think twice before making smaller claims
CLAIMS history is becoming increasingly important in getting the best value insurance cover. As the market firms and risks are more closely scrutinised, some will find that their level of past claims is blocking future cover.
"If you dont have a good claims record then cover will be increasingly expensive and harder to find," says Nigel Wellings of Farmers and Mercantile.
He suggests that for claims worth less than £1000, farmers should think hard about whether they can stand that loss themselves, rather than automatically making a claim and adding it to their record.
When a new insurer is being sought, it is standard practice for insurers to ask applicants whether or not they have had a claim in the last three years. If they have claimed in that time, they will also be asked for details of the claims.
The cost of liability insurance in particular is rising at a time when farmers are looking to cut their own costs. Most insurers have put up motor rates and employers liability rates by between 5 and 25% in the past year.
Taking on a higher excess is one route to reducing premiums. Knowing that they are going to have to meet, say, the first £1000 of a claim often promotes a better attitude to risk management, and so in turn that business is less likely to have to make claims, says Elaine Pyke, chief executive at FarmWeb.
Cutting out certain types of cover is another option, but this should be very carefully assessed, warns Mr Wellings. "Some larger estates are choosing not to insure their buildings. These tend to be estates which maintain buildings well and so they have a relatively low risk of damage and can afford to take a loss if it does occur.
"Where you should not do this is if you are borrowing money on the farm and cant stand the loss yourself. And theres no point in having a half-way house and simply reducing the values of buildings because this will lead to under insurance, which is no good to anyone."
Insurers are putting more effort into risk assessment when they look at new business, and on existing policies when they come up for renewal, and this will continue. There are also likely to be an increasing number of exclusions or special conditions attached to policies in future, so policy holders must make sure that they read and understand what they are buying, say advisors.
All insurance policies contain general terms and conditions, placing a duty of care on the policy holder. When a claim arises, the way this duty of care has been carried out by the insured could come under scrutiny. It would include maintenance of machinery and vehicles, for example.
"If it was known that the brakes were in poor condition on a farm vehicle which is then involved in an accident, this could significantly affect the outcome of the claim and the extent of the protection which the policy holder has under the cover," says Douglas Brown, a director of Farmers and Mercantile.