Kobus Stapelberg, the partner who heads up King Price’s agri division, perfectly sets out the agri insurance landscape: There are still so many opportunities available.
Tony: To start off, can you give us a bit of an overview of the business, the growth over the last year, specific areas that are better than others and any developments that are worth noting.
Kobus: I feel small in a big world when I think back on how we started.
It’s close to four years ago, July 2019, that we started with seven agri policies, which comprised about R3 million in annualised premium. Now, at the end of June, which is end of our fourth financial year, we’ll break over R400-million in annualised premium for King Price agri. This is substantial growth and a blessing.
For the past year, we budgeted for almost 50% growth on agri assets and 58% on crop growth, and it seems that we’ll exceed the asset growth budget. For crops, we’re almost at 60% growth year-on-year.
We’re grateful for our clients and broker partners who support us and believe in the King Price agri brand. In the agri space, we only work through brokers. We can’t work without our broker partners.
Tony: It’s quite unbelievable how, in such a short time, a direct insurer sorted out a top intermediated channel. It just shows that, where there’s a need, you just must provide a good product and service, and then you can get into the market.
Kobus: Yes. I remember when we first started that there were broker groups and people in brokerages who said they wouldn’t support us because we were a direct insurer and in opposition to brokers. We’ve proved to them, in the last four years, that we honestly believe in the importance of the broker channel for agri insurance.
We aren’t selling agri cover directly. We need an intermediary to be our eyes and ears, and to support us with regards to risk management. So, again I want to say to all the brokers, we need you.
Tony: Let’s focus on crop insurance a bit. What’s the importance of your growth in this area and how are you managing risks?
Kobus: We’ve had two high growth years and are currently in our third season. We said we were going to push the growth targets hugely but, for the next year, we’re back to normal growth rates. We’re where we want to be. We’re currently the third largest crop insurer in South Africa, and we don’t want to become bigger than that.
The reason for this is that we can still select the risks that we want to insure and the areas in which we want to insure. You and I know that there are certain hail bands in South Africa. There are certain areas that we call ‘red zone areas’ with regards to hail. We can’t insure there because we aren’t the biggest. The bigger insurers need to cater for all. The smaller insurers can say that we can’t take huge risks and need to be selective for the sake of our clients and the sustainability of our business.
I don’t think the reinsurance market wants any other crop insurer to exit the market. It happened with one of the bigger insurers a few years ago, and it’s my view that they were forced into taking risks that they would have rather not have taken, and it destroyed their crop division. We need to be very prudent on underwriting and market selection, area selection and diversification just to sustain business.
Tony: Asset insurance in the farming environment is quite different from crops because you’re exposed to vastly different risks. What need are you are seeing from farmers when it comes to asset protection, and how has the uptake been in that space?
Kobus: It’s been particularly good. In the past, many farmers preferred to manage their risks themselves, but with climate change and the severity and unpredictability of weather events, there’s been a much higher take-up on insurance. There’s also been as increase in partnerships with insurers and risk takers to participate in risk mitigation, just because everything is more severe and devastating.
Tony: My next question answers to that a little bit. There are two, shall we call them, Godzillas in the room, not elephants. The one is loadshedding and then the other one is climate change. These obviously have an impact. What have you seen and what can be done to lessen the risk and the impact on farmers when it comes to loadshedding and to climate change?
Kobus: There’s a difference between lightning currents and surge currents. Lightning currents occur when electrical systems take a direct strike and a large wave of current travels through electrical systems. We know lightning and have dealt with it all these years.
Now there’s a difference in lighting protection. There’s cheaper lighting protection that only protects against surges. The definition of surge current is when there’s switching in surges, like when there’s a strike somewhere and the current under the ground comes to your premises. It has a ripple effect and isn’t a direct lightning strike.
What I’m reading, is that all the insurers say that loadshedding and power surge claims have increased substantially. Loadshedding will be with us for a long time to come and the stages will just get higher and higher, and the surge claims will just become even more frequent. We as insurers are paying for that and some have started allowing for it into their pricing models. We at King Price believe in avoiding these claims before they happen.
We’re talking to a company that can support us by providing arresters for our farmers. If we can bulk-buy, we provide these components cheaper to our famers. They can be built into a DB board and will take over current surges that happen. We can reduce the frequency of claims drastically if we can start managing the risk from the DB board of every farmhouse as well as businesses, pack houses and workshops.
Tony: That’s proactively working with the clients as well as the brokers to manage everyone’s risk, that makes a lot of sense. That’s how the insurance industry has worked over the years, finding ways of shielding everyone against the loss rather than just paying out on a loss.
Kobus: Exactly, and that comes to another thing on our asset side, an innovation that we’re busy with. Just over a year ago we launched ‘pay as you farm’, a first in South Africa. It’s usage-based insurance cover for agricultural equipment like harvesters and high-rise spray equipment – items that are high in value.
Farmers and brokers were a bit hesitant at first, but not anymore. One of our big clients, a mega farmer in the Western Cape, received R126,000 back on his ‘pay as you farm’ policy this year, based on the actual usage of his insured items.
Then, we’ve partnered with V Plan, a network of more than 250 vets in South Africa. They document every sickness in an area, which we then get on a national database, allowing us to gauge what the problem could be in every province and district. We can see if it’s a red water problem, a hard water issue, or a cold sickness, etc. So, V Plan assists us with risk management according to sicknesses and management of stock.
Tony: That’s what we would call the lesser-seen benefits of the insurance industry. It’s all those differences that insurers make, in terms of monitoring these things, these challenges and risks in all segments of business and personal life.
In closing, in terms of your broker partnerships, you’ve had stellar growth over the last four years, which is magnificent. But with the uptake you’ve seen, and with how farmers react to being offered agri insurance, what would you like to say to brokers?
Kobus: In general, businesses need to last for at least three years before they can say that they’re successful and sustainable. We’re ending our fourth year at the end of June, and for all the people who wondered whether this ‘new kid on the block’ in the agri space would make it, we’re still here!
We’re not bragging, definitely not. Anything can happen. Destruction can happen anytime. But, we still believe that our good underwriting philosophy is the base of our business and makes us a sustainable partner in agri insurance.
If you want something new, innovative, a fresh look and feel on risk management and risk selection and risk transfer, talk to King Price agri. Our culture of risk (I always use #CultureOfRisk on social media) supports better premiums via a better approach to risk. We may not be the cheapest. But, if A, B and C are the same, then we’ll be the same. And, if a farmer or a broker assisting a farmer wants to manage his risks better and become a better risk, then we’ll save them money because they’re participating in this whole sphere of risk mitigation, risk transfer and self-insurance. We’ll give the best of the best, and not just market-related comparative quotes.
But we need input from the broker and the client, and their support, so that we can manage the risk better in order to provide a better premium.
Tony: Insurance shouldn’t be a one-way transaction at take-up and then a one-way transaction at claim stage. There’s a whole lot that should happen in between.
Kobus: Exactly! We’re small enough to still be proactive and innovative. We’re like a ski-boat compared to a container ship. It’s much easier to change direction in a ski boat!
Tony: It’s great to chat to you, and it’s fantastic to hear that there’s such a big uptake in the farming community because that’s where food security lies.
Kobus: Thank you very much to COVER. Interviews like this gives us opportunity to push out the positivity in our business and in our industry.