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Ag insurance policies hard to get; 'hard market' to blame |
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By MONETTE TAYLOR | South Central Texas Edition |
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August 8, 2002 -- When that new Farm Bill check arrives, producers had better stash away a big portion of it for ag insurance. That is, if they can find someone to write the policy! John Graves, certified insurance counselor, and executive vice-president of the Hertel Insurance Group in Austin, told attendees at the recent Southwest Fertilizer Conference in San Antonio that insurance is going to be harder to get, and producers will be forced to pay more for less coverage. "The ag industry is in a crisis, from an insurance standpoint," said Graves. While the '90s presented what is called a "soft market," where insurance coverage was readily available, and many agencies and agents were eager to write ag policies, the situation has reversed. "Most of the '90s, we were in a soft market. We (insurers) were competing for your business," he said. According to Graves, the market, now, is considered a "hard market," which means that ag coverage is hard to get and the premiums are high. He said that, like most businesses, insurance goes through cycles, according to interest rates, new capital, competition and other soci-economical reasons, including catastrophic disasters. Not only did 9-11 affect the insurance business, but other home and auto losses have incurred heavy losses for insurance companies. Graves said it has been like "$1, in, and $2, out," for companies. He said that a good ratio for expenditures would fall in the 25 to 30 percent range. "Some agencies have been unable, for various reasons, to make a profit over the last several years," added Graves. Agent numbers have decreased about 50 percent, he said, and the ones who are left have "hefty increases for less coverage." Because of the losses, companies are looking to invest, elsewhere, looking for less risk for their dollars. According to Graves, 9-11 took up to one-third of the dollars out of the system, putting a huge strain on everyone. With the stock market down and fluctuating so wildly, many insurance agencies are choosing to no longer provide ag insurance at all, due to the heavy losses they have suffered over the past few years. Much of the new insurance business needs to "fit into a box," said Graves, referring to specific policies that will be written. Where agents could use eight or 10 companies, before, the numbers have dwindled down to between four and five companies. Graves said producers should expect an increase of up to 94 percent ... if they can find an agent who will write the policy. Insurance companies are becoming very selective, and a producer should make sure to provide the agent with a 60- to 90-day lead on applications. With premiums rising, coverage reduced and deductibles higher, producers face a real crisis finding and keeping ag insurance. As for where we go from here, Graves made the following suggestions, adding that the ag business community contributes to the problems with insurance. He said agriculture needs safety programs written, documented, and in place; hiring practices need to be addressed within the companies; decisions and strategies need to be decided upon; and OSHA requirements must be followed. He said that if ag businesses will address these things, insurance agencies will put ag insurance in a more "positive light." In closing, the consultant said producers need to bring insurance to the "top of their business," budget for increases, and decide just how much risk each individual producer is willing to take before talking with an agent. He said "overlapping" agents (asking several to work on the same policy) is not being tolerated, and reminded producers that they need to be sure and address the 60- to 90-day processing time. While companies realize the problems created for producers, insurance agencies/companies are not in business to lose money, continually, and they realize the premiums are inflated. For the next few quarters, Graves summarized, this is how it looks for ag insurance. |
