Menu

For most of the past 15 years, property and casualty insurance companies have struggled with profitability. This longer-than-normal "soft market cycle" subjected insurers to intense competition that drove prices down for consumers. Ultimately, though, it also resulted in many companies leaving the agribusiness insurance marketplace because they simply could not make a profit.

More recently, the market has begun to "harden," and consumers have seen increases in the price of insurance. Insurers willing to remain in the ag-insurance market could no longer afford the sustained losses.

Even before the terrorist attacks of Sept.11, most property and casualty insurers had begun to increase premiums – including Nationwide, which is now the largest U.S. insurer of farms and farm cooperatives. In the past 18 months, the declining stock market and the costly attacks of Sept. 11 have accelerated the shift to a hard market.

Reinsurance – How it Affects Consumers

Insurance companies use reinsurance to insure themselves in the event of catastrophic losses, such as hurricanes and tornadoes. Having this safety net allows insurers to keep costs down.

However, industry trends and the threat of future terrorist attacks have made it more difficult to secure reinsurance -with such companies suffering an estimated $40 to $80 billion dollars because of the terrorist attacks. Reinsurers also face the same problems as insurers when it comes to investments and a poorly performing stock market.

"All the trends you see in the insurance industry are taking place in the reinsurance industry as well," said Milt Piontkowski, reinsurance manager at Nationwide Agribusiness Insurance. "Insurers have to pay more for quality reinsurance, so consumers will have to pay more for quality insurance."

What It All Means To You

"Coverage will continue to be available to farmers," said Jerry Hillard, officer at Nationwide Agribusiness Insurance. "However, the best way to ensure that you will get quality coverage at reasonable rates is to do everything you can to help prevent injuries and property losses on your farm."

Hillard suggested asking your agent about loss control services, farm safety surveys and policy reviews.

He said it's important to make sure both you and your agent understand your coverage needs and policy provisions, "especially if more than 10 percent of your income comes from nontraditional farm activities, such as hayrides, farm markets, and you-pick operations," he added.