This year has been a record breaker in terms of storms, property damage and insurance claims. According to recent statements from the Insurance Information Institute (I.I.I.), during the first nine months of 2011, U.S. auto, home and business insurers paid policyholders more than $25 billion in catastrophe claims.
From hurricanes and tornadoes, to severe thunderstorms and flash flooding, America’s farmlands have been some of the hardest hit areas. Unfortunately for some farms, the topic of insurance is not properly addressed, and leaves the cost of losses in the hands of the property owners.
There are, however, ways farmers and agribusiness owners can prepare themselves for the unexpected, and better understand the coverages that help protect their livelihood.
And, as a policyholder, it’s important to understand recent changes made in how insurance claims professionals and underwriters are assessing commercial and agricultural property for policies.
Westfield Sr. Claims Leader Doug Fidler offers Grains of Knowledge readers valuable insight on the current structure of agribusiness insurance, claims and recovery for losses.
Q: What are the most common claims filed for an agribusiness operation?
A: The following breakdown of claims and associated losses comes from the Westfield Claims Cube in Business Intelligence for the first quarter of 2011.
- Workers Compensation/Medical
- Property Damage
- Hail Damage
- Lightning Damage
Q: How can policyholders better assess their risks?
A: Policyholders can better assess their property and risks by meeting with their insurance agent annually to discuss various inventories of their farm equipment, as well as reviewing current values on barns, outbuildings and other farm structures, as well as their farm personal property. Having accurate values is essential in correctly adjusting the losses. They should ask on an ongoing basis whether any updates are required to protect themselves due to an unexpected loss.
If an insured has any scheduled farm personal property on a schedule, a regular review should be completed, to make sure any items sold or no longer owned are deleted, or any new purchases are added to the schedule.
For those who do meet with their agent annually, they should still ask themselves on an ongoing basis whether or not there are any updates that would impact how the farm is protected.
It’s imperative that agribusiness owners have the proper descriptions and coverages in place to account for a farm’s needs. This includes a clear description of the buildings and structures on premise, their location on the farm and the farm’s geographic location. All of these details are extremely critical in handling farm losses and adjustment of agribusiness claims.
If there are workers on-site, proper insurance should also be included to cover liabilities associated with employees and labor activities.
Q: How are farms and agribusinesses properties evaluated for insurance?
A: Previously, claims professionals were required to use the Marshall & Swift Building Valuation System (BVS) for evaluating the cost of commercial and agricultural properties, and the Insurance to Value (ITV) calculations on buildings/structures.
However, there is a new procedure, which became effective Sept. 30, 2011. As part of the new procedure, claims professionals and underwriters will use a new tool, Xactware 360 Value (360 Value). This tool is to be used for ITV calculation on agricultural buildings and/or structures.
The 360 Value replacement cost amounts represents the estimated cost for a contractor/repair company to rebuild the structure(s) in the referenced geographic market. Rebuilding and associated costs are also done in accordance with current building codes following a total loss. The building cost amount includes the price of labor, materials, permits, fees, and contractors overhead and profit. It does not, however, include costs for excavation or land value.
Q: How will the new procedure for claims and underwriting impact farm and agribusiness policyholders?
A: Now, claims and underwriting for these properties will be consistent through using the same system for valuation — the 360 Value for ITV’s.
This will enable our claims professionals to determine if replacement cost or Actual Cash Value (ACV) is to be paid following a loss. Under some policies, if an insured’s limit of insurance on a damaged building or structure is at least 80% of its full replacement cost as of the time of loss, we will settle the loss at replacement cost.
To ensure insurance industry professionals are adequately prepared for these changes, all property claim handlers are required to complete the 360 Value online tutorial and training videos.
Considerations for Readers:
While most people consider insurance an annual responsibility at policy renewal time, insurance should be a proactive part of how you manage and operate your farm. Policies should be evaluated and updated any time changes are made to your property, buildings and/or structure or agribusiness operation.
What updates have you made recently that impacted coverages needed to protect your farm?
Doug Fidler is the Westfield liaison between Agribusiness Unit and Claims, and Mansfield Claims Leader.