Property Insurance: ‘Hard Row to Hoe’ for Agribusiness

Whether we’re talking weather or property and casualty insurance market conditions, the forecast for 2024 is not favorable to farmers and others in the agribusiness industry. While the Old Farmer’s Almanac predicts above average snowfall and/or wetter-than-usual weather for much of the country this winter, the insurance industry predicts higher rates and limited capacity for some coverage lines in the agribusiness sector. 

Property Insurance market conditions — heavily influenced by recent catastrophic weather events — appear to be the most unfavorable, followed by Auto Insurance and Umbrella/Excess Liability Insurance. Overall, agribusiness entities can anticipate diminished capacity, higher rates and more stringent underwriting.

The good news: There are steps those in agribusiness can take to improve their standing in the P&C marketplace, outlined below.

Property and Auto Insurance challenges 

Despite relief and investment from government initiatives such as the Farm Bill and Inflation Reduction Act, agribusiness grapples with persistently rising Property and Auto Insurance rates. Many carriers have exited the agribusiness market, and those remaining are streamlining their books of business. When demand exceeds supply, underwriters seek “best-in-class” risks for the limited coverage available for renewals and new business.

This underscores the importance of initiating the renewal process early, with focus on the significant shifts in underwriting parameters from previous years. The early (and prepared) bird gets the worm on renewals. 

5 tips for navigating today’s restrictive underwriting climate

1. Expect a rigorous application process. 
2. Start early, and comply with new information requests.
3. Implement new  loss-control measures, such as fire protection, to mitigate and differentiate your risk. 
4. Submit applications early to address underwriter queries before deadlines.
5. Collaborate with your broker to bring your story to life during the underwriting process.

Note: It’s especially important to avoid errors in the current market because underwriters can easily cull property accounts by non-renewing late and incomplete renewal submissions.   

Agribusiness entities in remote areas with high property values or unfavorable loss experience face the greatest challenges. Accounts with recent large Property claims or multiple medium-sized claims may be pushed into the exorbitantly priced surplus lines market for coverage. 

Rising rates for Commercial Auto

The frequency and severity of Commercial Auto claims in the agribusiness sector have risen. Insurance Journal reported that Farmers Direct requested a 20% auto rate increase in West Virginia — a recent example of increases businesses of all sorts are experiencing nationwide. Claim reserves are trending higher than previous years, as claim settlements are more expensive.

Telematics — technology that monitors drivers to improve safety and efficiencies — can help mitigate auto claims and offer the potential curbing of rate increases. 

Partner with a knowledgeable and experienced insurance broker 

Working with a broker who specializes in the agribusiness sector increases the likelihood of securing comprehensive new coverage placement and program renewals. Longstanding underwriting relationships prove vital in times of limited capacity. A broker’s buying power with agribusiness carriers can be advantageous, especially with Property Insurance; non-renewals can get a second look, as an adept broker will leverage established relationships and push your case forward.

The right broker possesses knowledge beyond insurance. In an article titled “Insurance pros can help agribusinesses bypass political noise,” PropertyCausalty360 notes, “Agents and brokers who support agribusinesses not only must have a handle on the regulatory and financial issues at play in this market, they also really need to know the crops their clients are growing as well as the infrastructure and staffing demands on those farm operations in order to accurately access risks.” 

Market outlook on insurance for agribusiness 

Here’s what Alera Group said in our 2024 Property and Casualty Market Outlookabout factors influencing the market for the agribusiness sector: 

• “There are a limited number of insurers. Insurance companies have been exiting this sector or cutting back on the amount of business they will write. Few new companies are stepping in to fill the gap. As a result, agribusinesses insurance buyers will have limited options in 2024. There will be fewer options in states where the catastrophe risk level is high and regulators make it difficult for insurers to achieve rate adequacy. 
• “There is some competition for quality accounts. With less marketplace capacity, insurers will be highly selective in the businesses they choose to write. Key factors will be the quality of the business’s management team, risk control program, financial strength, loss history and geographic location. 
• “Property insurance is still challenging. Insurers continue to push for rate increases, higher deductibles and more coverage restrictions to restore profitability in this line of business. All buyers should anticipate some rate increase regardless of their loss history and geographic location. Businesses in catastrophe-prone areas will see the most significant increases and a shortage of standard carriers interested in writing agribusiness. Wholesale markets and state FAIR plans will be the only options for some buyers. Rate increases are expected to moderate in mid-2024, barring extraordinary catastrophes. 
• “Accurate property values are a must. Insurers will stand firm on businesses maintaining current property values. Businesses that have yet to keep pace with rising property values will experience steeper rate increases as insurers require their policy values to be updated. 
• “Increasing use of AgTech impacts risk. Technological innovations are making farming more efficient. Adopting new technologies such as agriculture robots, thermal imaging and drones poses new risks that may not be covered in existing policies. 
• “Buyers need to understand the coverage they have and where there may be gaps they may need to fill. Buyers seek alternatives to traditional program structures. For some buyers, coverage is becoming unaffordable and, in some cases, unavailable. Agribusinesses are looking at new alternatives. Parametric Insurance is one example. Parametric (or index-based) solutions are a type of insurance that covers the probability of a predefined event happening instead of indemnifying actual losses incurred. They complement traditional insurance coverage for policyholders aiming to reduce their risk exposure and can cover risks that have traditionally been uninsurable. 
• “Per- and polyfluoroalkyl substances (PFAS) are a growing risk. More than 6,400 PFAS-related lawsuits were filed between July 2005 and March 2022, according to Bloomberg Law, with a widening scope that has not only included PFAS manufacturers but has also begun to reach businesses that work with PFAS, which are commonly found in pesticides used in agribusiness. Some carriers are beginning to exclude coverage for these chemicals entirely.”

For a broader look at navigating insurance market conditions, download the Property and Casualty Market Outlook. The report provides valuable information on factors driving the current P&C market, with analysis categorized by lines of coverage, personal as well as commercial.

To speak with a local broker who specializes in agribusiness and has access to resources nationwide, contact Alera Group.

CONTACT AN ALERA GROUP SPECIALIST

About the author

Greg Dohrmann
Managing Partner
Dohrmann, an Alera Group Company

Greg Dohrmann provides insurance and risk management services to nonprofits and other businesses throughout Northern California. As managing partner of Dohrmann, an Alera Group Company, he leads the firm’s strategic direction. With expertise in commercial insurance and employee benefits, Greg focuses on organizations located within Northern California’s Central Valley, specifically in his hometown of Stockton. Greg is a longtime volunteer in the California chapter of the Angelman Syndrome Foundation, including four years as president of the chapter’s board of directors. 

Contact information:

• greg.dohrmann@aleragroup.com
• Connect with Greg on LinkedIn