What Brokers Need to Know About Risk in Farming and Agriculture

Given the wide variety of businesses involved, farm and agricultural insurance policies need to cover both general liabilities and more specialized risks.

“[Agribusinesses] need general liability coverage. Often they also need the inland navy for their agricultural machinery and goods. The biggest concern we see is that people have coverage for their general liability but have nothing for exposure to something like chemical drift,” Tucker told Insurance Business.

“It’s something we like to offer through our agribusiness programs. We offer the [general liability coverage] for a sprayer, and they also have E&O (errors and omissions) so if they make a mistake, that’s also covered with chemical drift and pollution.

Tucker is an agribusiness and agricultural insurance specialist initially with Sierra Specialty, which was acquired in 2019 by XPT Group, a specialty insurance distribution company. The California-based MGA is changing its name to Sierra Farm under XPT.

Sierra Farm’s exclusive agribusiness program covers a wide range of farming classes, including pesticide and herbicide spraying services, farm consultants and managers, farm labor contractors, and more. The program is available in all 50 states.

Wildfires are by far one of the most significant risks afflicting the food and agriculture industry. For example, the large wildfires that razed parts of California’s Napa Valley in 2020 are still having lingering effects on agribusinesses in the state.

Read more: US wildfires: Broker reveals gloomy early season outlook

“Some wineries are still dealing with the smoke damage to their grapes. The wildfire may not have burned their crops, but they are dealing with the damage two years later. Their production is messed up,” said said Tucker.

There are limited wildfire insurance options for California businesses, most of which must go through the California FAIR plan to be covered.

“Most of these farms are on burnt land, so they are paying thousands and thousands for very limited coverage with a state plan. Montana, Oregon, Utah — all of those places are currently dealing with wildfires,” Tucker said.

However, fires that occur on an insured’s property are still generally covered by agro-industrial policies. “There is a difference between a forest fire and a fire. Let’s say you have a custom harvester in the field and there is a backfire with its moving equipment causing a fire. It would be something that could be covered. But it’s different from a wildfire that destroys and wipes out thousands of acres,” Tucker explained.

As farms and agricultural businesses increasingly adopt technologies to increase their productions, their cyber risk profile also increases. Farms are increasingly relying on GPS mapping, drones, and automated tractors and sprayers — all potential ways for cybercriminals to strike.

“We certainly see a lot more technology involved in the risks of these companies. I see tractors that need cyber cover because a computer is controlling them, or you have a lot of these sprayers that no longer just use their spray rigs and use drones as well. So now you need drone coverage, which is hard to get right now,” Tucker said.

Cyber ​​hedging is a growing necessity for agribusinesses and farms, but owners still need to be made aware of the risks to their data and IT systems. Ransomware is of particular concern, with the potential to cripple farm operations.

Read more: Cybercriminals target ‘low-hanging fruit’ in agribusiness

“[Cyber insurance] is a tough sell because if they have a farm they are already spending thousands of dollars on their insurance. Adding another thing to spend money on is a tough sell to them. But the need is huge because many of these tractors are all driven by computers,” Tucker said.

“If you have a large farm of 5,000 acres, for example, anyone could hack into your tractor, stop all production or harvesting, and set a ransom of $2 million. Then they’ll say they won’t let these machines run until [the owner] pay this ransom.