Agricultural disease can wipe out crops and lead to a significant loss of revenue for farmers. Other businesses rely on those crops. Food manufacturers could be missing out on an important supply source. But farmers and related types of small business owners don’t have to be completely subject to the whims of nature. Instead, they can take steps to prepare their crops and reduce risk with the help of their insurance agents.
That said, figuring out how to prepare for agricultural disease isn’t easy. A lot can still go wrong. Having insufficient insurance coverage will leave agricultural businesses exposed to high losses. However, insurance agents can help clients try to minimize the potential fallout from agricultural disease. The first steps are reviewing policies and other risk management practices proactively.
By doing so, insurance agents can help clients financially while strengthening their own insurance businesses. Clients might not add to their insurance coverage right away. But helping them prepare for agricultural disease can strengthen relationships and increase customer satisfaction. Over time, that can lead to positive outcomes like higher renewal rates and more referrals from happy clients.
In this article, we’ll take a deeper dive into how insurance agents can help small business owners prepare for agricultural disease.
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Make Sure Clients Understand Coverage
A good place to start in terms of how to prepare for agricultural disease is to make sure clients understand insurance coverage. That could mean looking at their current policies as well as any additional coverage that might be available to them.
To limit the fallout from agricultural disease, many farmers obtain multiple peril crop insurance (MPCI). It is federally subsidized by the Federal Crop Insurance Corporation (FCIC), and it’s sold by private insurance companies. In fact, over 90% of farmers who purchase crop insurance buy MPCI coverage, according to the Insurance Information Institute (III).
“Both the cost of insurance and the amount an insurer will pay for losses are tied to the value of the specific crop,” explains III.
However, MCPI isn’t a set-it-and-forget-it type of purchase. As III adds, MPCI coverage has to be obtained “each growing season by deadlines established by the federal government—and before a crop is planted.”
What adds to the complexity is that not all crop insurance coverage is the same. For example, agricultural businesses can choose to get coverage based on one of four unit types.
“Each parcel of land that is insured independently of other parcels is called a unit,” explain economists from Iowa State University Extension and Outreach.
These units include:
- Basic Units
- Operational Units
- Enterprise Units
- Whole Farm Units
“The distance between fields, crop type being grown, inclusion within the same county, land tenure, production history and other factors each play a role in what unit classification may be best for a particular operation or situation,” according to researchers at the University of Nebraska-Lincoln.
With these nuances in mind, insurance agents should try to help clients understand areas like:
- Whether existing coverage provides sufficient protection against agricultural disease, depending on the client’s risk tolerance
- What options exist to add coverage that could help limit the financial fallout from agricultural disease
- When to renew crop insurance so that their farms retain sufficient protection
- How to submit claims in the event agricultural disease does strike; that way, clients can be prepared and efficiently handle this difficult situation, rather than trying to learn what to do when under significant stress
You may not end up selling new or expanded insurance policies to clients. But you can build trust and provide a great customer experience by walking clients through these types of areas.
Help Businesses Assess Risk
Another important aspect in terms of figuring out how to prepare for agricultural disease is helping businesses assess and reduce risk. Not every farmer will obtain crop insurance. The way they go about insuring their crops may differ. So, it’s important for farmers to understand what risks they face to see whether they want to continue with their current level of protection or make some changes.
As the Center for Rural Affairs notes, farmers can consider factors like their debt level and whether a major crop loss would get in the way of being able to pay back loans. “If so, crop insurance might be a good idea to help you protect against a loss,” the organization notes.
Other businesses, might be more comfortable being exposed to the risk of agricultural disease, if they have a very diversified business.
“Risk management may be built into your business model, and crop insurance may not be needed,” adds the Center for Rural Affairs.
Keep in mind that farmers and related business owners likely want to look beyond the direct financial risk of agricultural disease. Maybe they can afford a temporary loss of revenue. But there are other related risks to consider.
Agricultural disease means that a farmer can’t supply an important customer with crops that season. Now there’s a risk of losing trust with that customer. That could prompt customers to switch to other suppliers who use farming practices that they deem to be more likely to prevent disease.
So, insurance agents can help clients think about these types of risks and then determine whether there are different business practices they can engage in to reduce different types of risk.
Think Long Term
For insurance agents, even you help a small business owner assess their risk and they end up not purchasing additional insurance with you, that can still be good for your business long term. Because as you strengthen client relationships, those same customers might come back to you for other types of policies that they need down the road. Or, they might connect you with other agricultural businesses, for example, that are in the market for crop insurance.
Of course you are thinking about your own business in the long run. You can also help clients plan for the long term by connecting them with other resources. This will help them reduce the risk of agricultural disease in the future.
For example, if you have several clients that work in different areas of agriculture, you might host a networking event or create a social media group so that they can interact. That way, they can share tips with each other on how to prevent agricultural disease, among other business practices.
As a result, farmers can more proactively prepare for future issues. Rather than being caught off guard and having to respond to crop disease only after that actually occurs. Even just sending a helpful article that you’ve come across could be appreciated by clients.
Insurance agents can do a lot to help businesses prepare for agricultural disease. Even if you’re not an expert in farming practices yourself. You can still provide your knowledge in areas such as risk management and help clients thoroughly understand insurance coverage options. In the long run, that can help both you and your clients build more successful businesses.