Farmers’ incomes are uncertain year in year out. The size of a harvest is highly dependent upon the weather and this will definitely not improve due to climate change. During periods of prolonged drought, heavy rainfall, exceptional hail damage, etc. the Disaster Relief Fund used to provide some form of compensation. The government has now worked out a scheme in which the private insurance market will cover this risk from 2020.
The government anticipates a five year transition period to phase out the Disaster Relief Fund. Subsidies allocated by this fund will be phased out systematically to enable the simultaneous development of a private insurance market. This will avoid farmers being left without insurance because the transition is progressing too fast, as the sector is not yet sufficiently familiar with private weather/crop insurance.
As an incentive to take out private weather/crop insurance, farmers will be reimbursed up to a maximum of 65% of the premium during the initial years.
Despite the extra costs associated with this additional insurance, there are also benefits for the farmer. As an emergency fund, the Disaster Relief Fund only covered a limited part of any damage incurred. The administrative burden meant that those affected often had to wait two to three years for potential compensation. Private insurance will be a significant step forward in this respect.
The Flemish agriculture and insurance sector tends to focus on traditional ‘hail policies’ or ‘comprehensive weather/crop insurance’. The new subsidy scheme also focuses on this interpretation of traditional property damage insurance. In the event of potential damage, an expert is deployed to assess the actual damage.
Vanbreda offers an alternative in the shape of parametric insurance whereby a potential production shortfall is simply determined by means of pre-agreed statistics, often regardless of the underlying cause of the damage.
These products are very much on the rise as a result of recent technological developments. They frequently offer more benefits than traditional property damage insurance: more extensive guarantees, accelerated claims settlement (and fewer disputes), transparency, global cover, etc.
Moreover, the European Union subsidises premiums by up to 50% for members of recognised producer organisations in the fruit and vegetable sectors.
Vanbreda is in contact with various insurers who can offer the Flemish agricultural sector targeted solutions, i.e. data-driven insurance solutions. By increasing what’s on offer we can have a positive impact on the requested premiums.
As a broker, we can therefore offer the sector considerable added value. Through targeted analysis, we look for an appropriate insurance product from the right insurer at the lowest possible price.
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