Insurance – Creating sustainability in SA farming

Kobus Stapelberg, master of all trades at King Price Insurance, spoke to us about his mission to create an agri-culture around risk. 

“Farmers are a key component of food security, and we, therefore, share in their risk.”

Tony: I like your title, ‘master of all trades, especially in the context of Agri because that’s what’s required of farmers.

With Agri insurance, there seems to be a belief that it’s only for large commercial farmers and, other than that, it’s just insuring a couple of assets for the small farmer. What’s your opinion on that? 

Kobus: Many farmers don’t know or realise that Agri is a high-risk business because they’re on a farm, and far away from all the infrastructure in towns, cities and urban areas. A second factor is that farming is very dependent on the weather. We all witnessed the massive floods in the Free State last summer, which impacted the sector hugely. That’s why I’m a firm believer that, whether you’re a subsistence farmer or a big corporate farmer, you must have insurance for your assets. Whether you farm with a few cattle or you have a mega manufacturing plant or a citrus packhouse, it doesn’t matter. You need insurance to protect your assets so that we can support food security. If farmers exit the market, we won’t have food to eat, and food security is a very pertinent topic.

Many bigger farmers have a self-insurance fund. When we present to farmers, we break up agriculture into ‘Agri’ and ‘culture’ of risk, in other words: The culture of risk in Agri. Farmers need to start talking about and practicing the culture of risk. Risk mitigation practices must become commonplace, otherwise, insurance is just going to get more expensive.

Tony: What’s the main reason that small and medium farmers don’t have comprehensive Agri insurance? 

Kobus: Mostly, I think it’s because they don’t really know the extent of the risks that they’re facing. That’s why we talk about the culture of risk in Agri. We say, “Let’s do some things differently. Let’s start using tech to support and manage risk mitigation. We’ve partnered with a whole lot of tech companies that are making a real difference in the Agri insurance space, so let’s use our partnerships to make a difference at farm-level too.” 

We know that data is king and if we can get quality data, and interpret it more meaningfully, we’ll understand more about Agri risks and, in turn, make Agri insurance more viable. This also means we’ll be able to price individual risks more accurately and make policies more affordable. The farmers will hopefully buy into our theme of ‘agri-culture of risk’. We hope to convince them to actively manage their farming risks, and so we even give them a chance to start with a self-funding portion within their insurance solutions.

For example, South Africa recently had an outbreak of foot and mouth disease, and affected livestock farms were quarantined. For three weeks, they couldn’t move, auction or slaughter livestock. The whole red meat production industry halted until the quarantine was lifted. The whole value chain was impacted, from the farmers right down to consumers. 

Tony: What are the main risks that King Price covers for farmers?

Kobus: Because we’re big on livestock and we have high visibility at livestock shows and auctions, many farmers, brokers and business partners think that we only cover livestock. But that was just our entry into the market. We insure almost everything on a farm, from the infrastructure and the business elements to the vehicles, crops and livestock, to liability. There are some restrictions though. For example, we can’t cover fire on grazing land but we’re working towards something that’ll give our clients the opportunity to buy cover for feed or hay bales after a fire. So, if there’s a fire on a cattle farm and the cattle can’t graze, we can help by getting feed or bales so that our client can provide for the animals. You can’t move your cattle to another farm, so we need to bring something to them. 

Tony: There can’t be many insurers left that do Agri. I know that a couple of insurers left the Agri market some years ago. 

Kobus: The big insurers, will always be there and they’re good. I have a profound respect for them. In 2018 I joined King Price to head up their newly-established Agri division. Before I joined, I was approached by one of the very big, established insurers to become their head of underwriting, but I believe that Agri insurance needs a different approach to align it better with the needs and risks of modern farmers, and so that’s why I joined King Price.

My father was a farmer, and I’m one of seven brothers, five of whom still farm. I worked at Mutual & Federal before I became the head of Agri at ABSA, and after that at TWK Agri. I have extensive farming knowledge and experience. In my view, the whole problem statement in the Agri space is that farmers aren’t insuring all their risks, or they’re self-insuring because they don’t like the product solutions in the market. That’s why King Price decided to enter the market with a different point of view and ideas for new product offerings. 

For example, we can do livestock standalone whereas some of the other insurers in the sector don’t. At King Price, if you only want to insure one bull, we can do it for you because we’ve structured our products and reinsurance treaties so that we can tailor-make product solutions for our clients. And that’s how we entered the market. 

It’s the same with the crop markets. It’s industry knowledge that up to 70% of crop clients aren’t insured. We recently spoke to some farmers who hadn’t had crop insurance for the last seven years. They said that crop insurance is too expensive and not worth the money. I don’t want to give any of our secrets away, but when we explained our tailor-made product solutions they opted to take out insurance with us. While we have ‘packaged’ insurance solutions, we can also tailor solutions for farmers’ specific needs and risks, or for the portion that they think could be a catastrophe to their business. So, it’s a whole new way of thinking about finding solutions.

We’re the first South African insurer to introduce a ‘pay as you farm’ model. Our reinsurer, Munich Re, also doesn’t know of a similar model in the Agri space, in the world. We know that some insurers have ‘pay per k’ and ‘pay how you drive’ products, but we’re the first to introduce usage-based insurance on harvesters and other high-value Agri equipment. On every policy anniversary, the farmer gets a once-off rebate of up to 30%, based on the actual usage of the insured vehicles and equipment. 

Tony: How else does King Price differ in their approach and ethos? 

Kobus: We do insurance with purpose because Mergon is our biggest shareholder, and they’re all about doing business with purpose. 

Francois van Niekerk, the founder of Mergon, said: “Success is serving yourself, but as soon as you start serving other people and you make other people’s lives easier, then you’re significant and not just successful.”

As examples of how we add purpose, we employ fire management systems and get involved in organised industry and red meat and milk production organisations. If we support all the organisations that manage the sector, we can provide insurance with purpose and that’s our whole philosophy: To be significant and not just successful.