What is Agribusiness Insurance?
Colleagues of mine in the business of providing agribusiness insurance describe the agribusiness industry as anything in the food chain, from “dirt to dinner.” Merriam-Webster defines agribusiness as an industry engaged in the producing operations of a farm, the manufacture and distribution of farm equipment and supplies, and the processing, storage, and distribution of farm commodities. Agribusiness ranges the entire breadth of the food chain, from the manufacture of farm equipment, to growing agricultural goods, to processing and distributing those goods worldwide. Agribusiness insurance applies to the property and casualty insurance products that protect the agribusiness industry
Agribusiness Insurance versus Farm Insurance
How should a farmer or grower insure their farm? Traditional farm insurance or ranch insurance policies are really more closely related to personal lines insurance than commercial agribusiness insurance.
There are a number of insurance companies that offer to insure your farm on a farm/ranch insurance policy form. These policies are typically “package policies” that combine coverage for your property insurance and liability insurance in a single policy form. These policies are useful for basic agribusiness operations.
Commercial agribusiness operations may require polices that are better designed to provide commercial agribusiness insurance.
There is no distinct rule that determines when you should expand your insurance coverage to a broader program. Things that you should consider include:
- What would it cost to replace your buildings? The insurance industry classifies communities from 1 to 10, based on the level of fire protection and availability of water. A hog barn can easily have a value in excess of $2 million. A multimillion dollar wood frame building in a class 10 community can be very difficult to insure and will typically need a true agribusiness insurance company to provide coverage.
- How sophisticated, specialized and costly is your equipment? Smaller operations can be quite adequately covered by a standardized farm/ranch insurance policy. As the size and sophistication of your equipment fleet increases, you may need to consider commercial agribusiness insurance coverage.
- Do you hire help on your farm? Many dairy, beef, pork and poultry operations have employees year-round. Fruit and vegetable operations often employ casual or temporary labor at harvest time. If you are employing nonfamily members on your farm, you may be required to carry workers compensation insurance. We would consider the need for workers compensation to be a commercial agribusiness insurance exposure.
- Are you concerned about pollution insurance? Larger beef operations often utilize feed lots to “finish” their cattle before taking them to market. The animal waste associated with these types of operations can represent significant potential environmental liability to the owner. Additionally, the use of fertilizers and herbicides, improperly applied, can create pollution liability to the farmer or grower. The recent introduction of genetically modified seed into the food chain has created environmental issues that are only now emerging. Some agribusiness insurance policies incorporate environmental impairment liability coverage in their coverage forms. Certain situations call for a true pollution insurance policy.
- What about product recall insurance? If your produce or meat is processed by others, your potential liability related to contaminated product may be borne by the processor. If your product goes from field to market, however, you may be exposed to the costs of withdrawing your product from the market place. .
Other Agribusiness Insurance Issues
The number of agribusiness insurance carriers is really quite limited. Specialty insurance carriers that understand the risks associated with agribusiness can be very valuable to a producer. The issues involved in agribusiness can create difficult issues for insurance companies, for example:
- Because contaminated food can affect a large number of people, insurance companies are reluctant to underwrite products liability insurance. Meat processing operations, particularly slaughtering operations, are particularly problematic.
- Unique exposures require specialized products like seed man’s errors and omissions insurance and product recall insurance.
- The use of genetically modified seed and livestock may expose the insurance carrier to liability losses that have not yet been identified or litigated.
- Unique exclusions for issues like hoof and mouth disease are common.
In order to decide what type of coverage you need, you must have a thorough understanding of what your exposure is. To evaluate your options we recommend that you discuss your situation with a knowledgeable insurance agent with specific farm insurance and commercial agribusiness insurance expertise.
Contact RJ Ahmann: To build an insurance policy that will be effective and affordable, you need a company that customizes your policy for you. Visit us at Small Business Insurance to consult with an insurance professional who will construct an insurance program that will work for you.
Russ Birch, CPCU, ARM has 33 years of experience in the commercial insurance industry in roles ranging from underwriting to sales and marketing management. In addition to his Chartered Property Casualty Underwriter and Associate in Risk Management designations, he holds an MBA in Finance from the University of Minnesota. He currently leads a team of professionals at RJ Ahmann Company in suburban Minneapolis.
You may call Russ, at (800) 600-6185, or fill out our simple Contact Us form to the right and we will return your call during business hours.
