The Waimakariri Landcare Trust recently invited GSI North Canterbury Director Brad Mackenzie to discuss changes to rural insurance in 2021 in their quarterly newsletter. Here's the points he encouraged the rural community to consider.
With June fast approaching (a common time for farmers to review their insurance cover), here are a few points of interest we are discussing with our Waimakariri rural clients while going through their renewal process.
Traditionally, it is common for us to reduce farm plant, machinery and vehicle sums insured each year reflective of market values. In turn, this is reducing the risk of overpaying premiums on inaccurate market values. But currently, we are seeing second-hand vehicles retaining their value due to the unavailability of new stock from reduced overseas imports and stalled freight forwarding. The cost to replace your farm vehicles may have increased from what it may have been last season, so we urge all farmers to re-evaluate your sums insured and research replacement values in today's market.
Another interesting point to consider this year is the recent news published by Te Herenga Waka-Victoria University around the Alpine Fault Line. New research shows a 75% chance of the Alpine Fault rupturing within the next 50 years. That's up 45% from around 30% previously. Researchers also discovered there's approximately an 82% chance of that earthquake being magnitude 8 or higher on the Richter Scale. Following these findings, we are strongly recommending that Waimakariri farmers review their interruption cover and sums insured on dwellings and sheds with this in mind.
While not as relevant to sheep and beef farmers, interruption cover is vital for dairy farmers to protect gross profit for income lost if the dairy shed goes. Some under-insured farmers were caught short in the Kaikōura area with dairy sheds damaged in the 2016 earthquake.
When evaluating sums insured for farm buildings and dwellings, it's important to consider how the replacement costs would look in today's construction market. With Carter Holt Harvey (New Zealand's largest timber supplier) announcing they've cut timber supply to 3 major building supply chains, and the price of steel rapidly increasing (with an average 15% increase being passed on to consumers), the cost to build is escalating. Make sure your replacement sums insured align with realistic, estimated build costs. This is worth a chat with your broker.
Lastly, if your renewal date isn't on the horizon but you think your cover may need reviewing, you can reassess your policies and sums insured before your renewal date. Speak to your broker about how, or contact me for a second opinion. I'm happy to give any feedback on your insurance schedule and how it stacks up in relation to your operation, whether your renewal date is soon or you already have cover in place.