Chanré Kaltwasser, CIB – Corporate Account Manager
South Africa’s agricultural sector one of the most diverse in the world and contributes a fair percentage towards our GDP.
Maize is most widely grown, followed by wheat, sugar cane and sunflowers. Locally produced wines, citrus and deciduous fruits are exported. South Africa is self- sufficient in nearly all major agricultural products. The sector consists of approximately 40 000 farmers, so in essence one farming unit feeds approximately 1445 people.
There are however many challenges facing agricultural stability. These include climate change, water scarcity, agricultural inputs and energy as well as financial crises. From small to large commercial farmers, Short Term Insurance plays an indispensable role in survival of the sector. South Africa is fortunate to have many Industry players with various specifically formulated products to suit the needs of almost every farmer. The Insurance Industry is also fortunate to have many individuals specialising in the agricultural segment, sharing their knowledge and expertise with customers to ensure an extensive understanding of the products available and cover required.
It is estimated that only 30% of farmers are insured, with about 70% of those being under-insured. Stats reveal that the major reasons behind the large portion of un- insured farmers are either because the insurance required is simply unaffordable, or the options to self insure far outweigh the need to insure and transfer the risk. This is where a short term broker pays an integral role. Whilst the bigger farmers may be in the position to carry quite substantial losses, the smaller ones are not. Catastrophic losses are almost never recoverable, irrespective of the size of the operation.
Whilst the farming assets are extremely important to insure, there needs to be grave consideration for insuring everything that is necessary for the farm to continue performing their daily functions which influence production and subsequently their income. Business Interruption is something that always comes to mind – I feel this is a very under-utilised cover. The Business Interruption section has been extended with many product suppliers to include cover following Theft and Accidental Damage; not just following Fire perils anymore. Track cover should also be a strong consideration – in more intense economic times, having to pay for the opposite tyre on a harvester would leave the farmer out of pocket and could be detrimental, hence the opportunity to purchase cover for these instances.
An extremely important extension to Public Liability cover would also be Spread of Fire cover – this is almost non-negotiable. Should a fire spread from a farm and there not be any cover, the economic effects would be detrimental to his entire operation. The insuring of livestock is also of grave importance. Cover is available in the market for fire and lightning, frostbite and freezing following these, as well as sickness of the animal. Bonsmara cows fetched an average price of R 47 121 in 2018 at the Fronteir Sale in August 2018. It is therefore seen as important to insure these animals against perils as their loss would be considerable.
This is where brokers step in and share their valued expertise with farmers. By conducting a Needs Analysis, it can be ascertained what cover is required. Based on this, it can be decided which risks can be transferred by way of Insurance, which can be avoided, mitigated and accepted by applying a risk management technique.
This will also be a value add by your client as you are not just insuring what was previously insured on his schedule. Affordability must be considered, but the farmer will feel at ease knowing that his biggest risks and exposures have been transferred , and the other risks have been grouped together with a full risk management plan in place.
There are various opportunities for brokers to get more involved in the Agricultural sector – NAMPO is the largest Agricultural exhibitions under private ownership in the Southern Hemisphere and takes place just outside Bothaville in the Free State every year. There are also various other expos that can be attended with an opportunity to advertise and meet prospects.
The Agricultural sector is vital to our economy, and Insurance is vital to the Agricultural sector. CIB have recently also upgraded their Agri offering to include essential covers for the sector.