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Farmers face up to 30% jump in insurance costs

Farmers face up to 30% jump in insurance costs
Farmland under water in the devastating 2021 floods in Mid Canterbury

Farmers are looking at a potential 30% jump in insurance as the cost of extreme weather events hits premiums.

This is another bit of bad news to hit local farmers in the pocket as farm costs scream up while payouts fall.

Crombie Lockwood rural insurance broker Maria Jamison said the cost of rural insurance had "risen `substantially" as insurers increased premiums in response to cost pressures.

"Rural insurance premiums have increased 30 percent, on average, from 2022 levels.”

Australian farmers were also facing a steep increase in rural premiums, with some farmers in New South Wales facing up to a 40% increase in insurance premiums, she said.

Greenfield farmer Darryl Butterick said his premiums had increased, but not "horrendously" despite his farm flooding two years ago.

However, his excesses had "moved up a bit".

Butterick said "it might hurt" when paying the premium, but insurance was a necessity.

"We went through a broker - that's a pretty big advantage."

Brokers shop around to get the best deal and in the event of a claim "they take a lot of work out of that side of things", Butterick said.

Hinds farmer Cole Groves said his premiums had gone by 17%.

He'd discussed the issue with his insurers and was told that they had to recoup costs from recent natural disasters such as Cyclone Gabrielle.

Compared to other costs, insurance wasn't a large bill for farmers - but it was not cheap, especially given it was hard for farmers to self-insure.

With natural disaster becoming more common, Groves said it could become harder to get insurance cover if you weren't already insured.

This year he made sure that his assets were insured for a realistic value.

Paying insurance on a tractor at $150,000 when it was only worth $100,000 didn't make sense, Groves said.

Mid Canterbury Federated Farmers president David Acland said insurance costs tend to creep up each year.

He thought his insurance bill had gone up between 5 to 10% but said it was enough to make farmers look at cost "very closely".

Acland was of the opinion that insurance was a necessity for farmers - but acknowledged the level of insurance would depend on the farmer's appetite for risk and self-insurance.

This year he increased the insurance excess on staff homes to reduce his insurance bill.

"It helped bring down the premiums a little bit."

Acland said it was also important to have the right level of insurance - and not over or under insure.

The anticipated rise in premiums is not confined to rural insurance. Personal and business insurance premiums have also increased sharply this year.

Jamison said IAG, the largest insurer in the country, had recently reported it had "lifted premiums by around 20% on car insurance and about 20 – 30% on house insurance, as at June 2023".

However, premiums in general could continue to rise during the remainder of this year, she said.

"Insurers are considering a more risk-based pricing approach, where customers are offered different prices based on the level of risk they present.

"This means a property prone to flooding would be charged a higher premium than one that is not."

She said extreme weather events had led to "an enormous spike in insurance claims" with an associated financial impact on insurers - including the cost of reinsurance.

The cost of repairs had also escalated due to rising prices, labour shortages and supply chain issues, Jamison said.

by Sharon Davis