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 insurance applies to the property and casualty insurance products that protect the agribusiness industry.
Obviously, most entities in the agribusiness industry, with the potential exception of family farms, have employees. And if you have employees, you are required in most jurisdictions to carry workers compensation insurance, as part of your agribusiness insurance program. Depending on the size of your operation, workers compensation insurance may be available at only a substantial premium to you.
The Impact of Workers Compensation Claims on Agribusiness Insurance Costs
Most business insurance buyers understand that their workers compensation premiums are related to their work comp claims, but many don’t fully appreciate how direct that relationship is. Frequent and severe workers compensation claims can affect the cost of your entire agribusiness insurance program. The number of insurance companies that are willing to offer workers compensation coverage to agribusiness entities is more limited than other business insurance segments, so it is important to understand the impact of your claims history on the availability and cost of work comp coverage.
- The most obvious impact on your premiums comes from the experience modification. Your insurance premiums are multiplied by the experience modification to adjust your premiums based on your own experience. The authority publishing your experience modification can vary, depending on your own business’ geographic location and area of operation, but the experience modification is an important driver of work comp premiums.
- Underwriters look at both claim frequency and claim severity in determining whether or not they even want to propose on your account. High work comp claim frequency or a couple of recent severe claims can greatly reduce the number of insurance carriers willing to provide you with work comp insurance coverage. Reduced competition for your business leads to higher costs.
- Even if they agree to underwrite your company’s work comp insurance, underwriters have pricing flexibility in most states. If they perceive that your account is riskier than average, they may place you in a company with higher rates.
- In most states, underwriters can adjust their pricing by crediting or debiting the rates for your company. Moving from a 40% credit to a 40% debit on your firm’s work comp premiums increases your cost by 87.5%.
Five Tips for Reducing your Work Comp Insurance Premiums
There are many things that you can do, as an employer, to reduce your work comp claims, and therefore your agribusiness insurance premium. Books have been written on the subject. Five simple suggestions include:
- Report claims as soon as they happen
- Schedule a claims review
- Create a safety program
- Bring people back to work
- Be reluctant to change insurance carriers
Final Thoughts
The world is full of venders; people who want to sell you a product and move on. Just book the policy, collect the premium and then find another prospect. A good insurance agent should become your partner on your insurance and risk management issues. They should provide you with good advice and help you navigate the complexities of the business insurance world. Choose your agent carefully and your workers compensation insurance program will fall into place.
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 Product Liability 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.
