A changing tide of claims

For weather-related events, 2018 was the second most expensive year on record for New Zealand insurers, with the total value of insured losses totaling $226 million. This fell just short of the 2017 record, which was more than $242 million. From flooding, storms and rising sea levels to drought, extreme weather events are becoming increasingly common and frequent.

The agriculture sector in New Zealand is particularly vulnerable to severe weather and natural catastrophes. It is expected that future climate warming is likely to continue promoting drought conditions, further increasing the drought threat to our communities. More than ever, New Zealander’s who work in the agriculture industry are seeing the importance in preparing for an increasingly varied suite of potential environmental risks to their farm or business. With many of these risks outside the scope of more traditional farm related incidents, knowing where to start and keeping your fingers on the pulse can be difficult. Farming after all, is a unique business and every situation is different.

Aon recently interviewed two of New Zealand’s leading rural specialists to discuss some of the key claim trends that are emerging as we move through 2019, with a view that equipping ourselves with the latest insights is a crucial component in creating resilient plans and insurance solutions for our clients.

What are some of the key claims that have come through from the past year?

  • Storm and weather-related damage claims

  • Meth contamination claims, which are rapidly rising across the country

  • Fire-related claims - from birds' nests in vehicles through to house fires caused by wiring issues

  • Windscreen claims on tractors and high-value farm vehicles

  • Burglaries in rural areas continues to increase

How have claim trends changed in recent years?

The climate change conversation has been met with the urgency to prepare on both a national and a local level; this is being strongly felt in the insurance industry and in the agricultural sector. The impacts of climate change on individuals and businesses alike are indicated in both the increasing number of claims and in the growing interest around preparation for climate change-related incidents.  

Similarly, natural disasters are becoming more and more frequent, and the effects of storms and flooding have resulted in record numbers of weather-related claims.

There are also changes developing around the types of farm asset claims. Perhaps a sign of changing times, and the development of new technology, is the number of farm buildings that are now surplus to requirement and sit empty. The construction of buildings such as haybarns and implement sheds are not designed to be empty and these obsolete buildings quickly become vulnerable to damage. Insurers are seeing more claims around damage to buildings such as these than ever before.

Other shifts in key claims include claims related to vehicles being stolen with keys left in them and the growing issue of meth contamination.

Tips of the trade:

In the interest of helping clients keep premiums down and ensuring good claims outcomes, our specialists had some handy tips:

  • Liability Cover is a must, particularly for dairy farmers. Increased rainfall and flooding can result in effluent pond overflow and in turn, river/stream/lake/freshwater contamination, resulting in a breach of the Resource Management Act. A conviction can now attract imprisonment for up to two years and fines of up to $300,000 for an individual or $600,000 for a company.

  • Business Interruption cover is essential to protect any business income lost as a result of an event that interrupts the operations of your business, including weather events and natural disaster.

  • Indemnity Cover should be considered as an option for unwanted buildings, or buildings that are unlikely to be re-built.

  • Consider an insurance valuation to provide insight into the underlying issues that affect the level of cover you need and ensures your sum insured values are accurate.

  • Explore higher excess as an option, particularly on farm buildings and houses. 

  • Ensure you have a broker to be an advocate on your behalf at claims time. 

  • Take advantage of the benefits that are included with your farm insurance e.g. automatic flood cover on farm fencing to $25,000 or Vero’s Best Doctors service which is invaluable in rural areas.

You can reduce claims by:

  • Maintaining buildings and equipment (including regular inspections of workers/tenanted dwellings as per conditions of policy, particularly for meth cover)

  • Employing quality staff and investing in quality training\

  • Having a strict and compliant H&S plan

  • Tightening up on security e.g. removing keys from bikes and quads

  • Implementing regular inspections of wiring and replacing where necessary on older dwellings

How can Aon help?

The most important actions people can take is to understand their risks in terms of key threats and potential impacts by enlisting expert help, and plan and insure accordingly.

Aon has the expertise, both in insurance placement and agriculture, to guide and advise at all stages of this preparation. Our focus is to educate our clients and ensure their property and businesses are more resilient to environmental changes and natural disasters.

For more information on how Aon can help, please contact us.