Page 18 - BCHNews-Spring2021-Web
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For Everybody's Benefit
 Insuring Dairy Farms
An Important Part of Risk Management
While having insurance coverage may not prevent a farm safety incident, it can certainly play an important part in the recovery from a fire, structural issue or even personal injury. Insurance is your last line of defence. When you call on your insurance policy it means everything else you have done to prevent a loss has failed.
Having the right insurance is important for all businesses including farmers. Insurance premiums have been increasing which generally leads to greater discussion, but not always accurate information.
The first uncomfortable issue is - insurance is a privilege, not a right.
 Not everyone or every
Don Hatton, Owner, Hatton Insurance Agency Ltd. [email protected]
• Interior of barns full of dust, and cobwebs or dust webs hanging from light bulbs
• Barn floors filthy and cluttered
• Flammables such as gas cans scattered throughout the farm
• Implement repair shops with grease and oil on floors
• Tractors and other equipment that are messy covered in grease, hay, and dust
• Hydraulic hoses in poor repair
• Welding and cutting taking place near flammables
• Overall farm cluttered with debris and old equipment
• No fire extinguishers in farm buildings or on mobile farm equipment
Insurance companies ask a lot of questions; if satisfied with the answers they receive, they will invest in you, and your farm will be insurable.
The Hard Market
We are currently experiencing what we in the insurance industry call a hard market. Many insurers are no longer providing insurance coverage to the dairy industry, meaning the remaining insurers have become very selective about which farms they will provide coverage for. The hard market has resulted in insurance premiums for some dairy farms increasing drastically. Ensuring your farm is in good repair and well maintained will not only help keep premiums down, it will help retain your insurability.
Climate change has led to more storms, flooding, and wildfires causing claims to substantially increase in cost and number. The historically low interest rates have resulted in insurance companies not being able to offset losses with investment earnings. All of this has led to the reserves reducing, which has required insurance companies to increase premiums to compensate. Giving Farm Safety and Farm Insurability a higher priority should be one of the more important aspects of your farm management program.
 business is insurable.
No property and casualty insurance companies are required by law to provide you insurance coverage. If an insurer does not like you or your operation, they have a right not to insure you.
The second issue is no insurance policy covers everything.
Insurance policy wording matters. An insurance company denies a claim when the policy purchased does not provide the coverage. It is that simple.
No two insurance policies are the same. Some companies provide more coverage than others. It’s always best to work with a trusted broker to ensure your policy provides adequate coverage for your unique farm requirements. A screaming deal on your premium may not be so beneficial if it comes at the cost of less coverage. Policy wordings are complex, and you likely need a qualified broker to help you ensure your coverage is right – buying on price alone is very risky! No farmer wants to learn after a fire that their bargain policy has left them unable to rebuild adequately.
Insurance – the principle of the many helping the few
Several hundred years ago, the concept of insurance was borne out of villagers coming together to rebuild for a neighbour following a disaster. It’s not unlike how farming families today will rally around another farmer who has suffered loss. Though not a very sophisticated system, this was the origin of Insurance, pooling funds of the many to be available for rebuilding the few who have a loss. This has evolved to become the ‘reserve funds’ that modern day insurance companies rely upon. Along the way, pooled funds grew, their investment returns became an important aspect, and to protect these funds, some people were excluded due to their poor risk habits.
Dusty lights are a safety risk and a red flag for insurance assessments.
Today’s ‘village’ is global, the system is sophisticated, and the reserve funds must be maintained (through investments and premiums) to have the ability to pay out claims. Underwriting today is still the process of assessing the ‘villagers’ with a view to ensuring only the most conscientious villagers are provided insurance, thereby keeping actual claims (payouts) low.
Even today, the reserves being invested belong to you, the policyholder. Everyone has a story of someone who took advantage of their insurance claim for personal gain. Fraudulent claims, such as falsely declaring items were stolen, ultimately are paid for by you the policy holders. Claims are paid out of reserve funds with your money. Increased premiums are the end result of excessive claims.
Underwriting – Should an Insurance Company Invest in You?
Insurance companies do whatever is possible to protect your reserves (the money you as a policyholder have entrusted to them.) When a broker approaches an insurance company to request that an underwriter provide your farm with insurance coverage, they are essentially asking the insurance company to invest in you. You are asking, “If I pay you $12,000 a year, will you rebuild my $3,000,000 barn?”
The underwriter’s job as Guardian of the reserve is to learn as much as they can about your farm operations to determine if you are a reasonable risk or not. A broker must put together a thorough proposal including photos, to paint a picture for an underwriter who has never met you. The underwriter must be convinced that you are running a good operation and the money will be safe invested in your operation.
Keep in mind that farmers are more insurable when they provide complete, accurate information, keep their claims down and maintain their farm in good condition.
Some of the items that will jump out at underwriters and affect your pricing and insurability:
• Farm building roofs in poor repair
• Buildings grouped too close together • Buildings in poor overall condition
• Improper heating
• Unfenced manure pits
• Fencing in poor condition
•Improperorexposedwiring,brokenlight bulbs in light sockets
• Extension cords used as permanent wiring to power equipment
• Barn lights lacking protective shields

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