It was going to happen sooner or later. Returns on premiums paid to insurance companies from agri-business have consistently dropped during the past several years. With last fall's events, those returns promise to become even more lean.

The good news is if you have a successful safety plan in place, and you have a low loss ratio, you can expect to fare better than those who don't. The bad news, regardless of your safety risk, your premiums will rise. Even worse, if you don't have a safety plan in place and if your business is considered high risk, you may lose insurance altogether.

The best accounts can expect to see a 20 percent premium increase, says Corwin Tufte of the Minnesota-based Ag States Agency. The highest risk accounts that can still get insured should expect increases as high as 65 percent.

"This has been coming for some time," says Tufte. "The cost of insurance is the No. 1 reason for the increases. Primary writers of policies have lost money for the past six years or so.

Then there's the decline in investments, and lower interest rates. Events at the World Trade Center also have raised the reinsurance costs. "Compound all those factors, and insurance companies have to do something, which means raising premiums," he notes.

Tufte says insurance companies generally pay more money in claims than they bring in through premiums. They make money by investing. But with investments dropping in a weak economy, those returns also are dropping.

Events on Sept. 11, sealed the fate for insurance buyers. According to Tufte, there are six companies worldwide that provide reinsurance.

Insurance companies rewrite policies to reinsurance companies in order to offset their risk. Before Sept. 11, the reinsurance industry had nearly $120 billion in reserves. However, the events depleted nearly half of those reserves. Tufte says the companies need to recover that money somehow, and the quickest and lowest risk way is to increase premiums.

There are several things you can do to protect yourself and your business. If you are running a high-risk business, the sooner you implement these plans the better. Ron Demaray, president of Pro-Compliance, says you should start planning now, regardless of your business' risk status.

"Even if your policy doesn't expire for another six months, you need to contact your insurance company now. This will give you time to work with your insurance company to make necessary changes," he says.

This also will allow you to take time to evaluate the value of various business components and decide whether they are worth
insuring and for how much.

"People need to take a look at each piece of equipment, each facility and each area," says Demaray. "They need to ask themselves 'if there is a fire, how would the lost item impact the business?"

Tufte says the No. 1 thing you must do is to have a safety plan in place. Insurers will be looking for the following actions:

  • Does management support the safety plan? Job descriptions should include safety measures, and employees need to be held accountable.
  • Are there written safety rules and procedures in place? Tag-out/lock-out systems are an example. If an employee is working on an auger, is there a policy and procedure that will tag the switch and lock people out from turning the equipment on while the employee works on it?
  • Is the safety plan active? You need to have scheduled safety meetings and provide updates to the plan.
  • Is it the plan verifiable? It's important to keep written notes of the plans and actions for your operation.

You may not be able to keep insurance costs from rising, but with some effort you can work toward keeping them as low as possible.

8 Things Not to Say to an Insurance Agent
Certainly there are many things you shouldn't say to your insurance agent, but here's a sample:
8. "We saved a bundle having Joe from farrowing do the wiring rather than pay an electrician."
7. "If you're going to require all these safety standards, I'll move my insurance to another carrier."
6. "When we're busy, our hiring requirements are a warm body and a pulse."
5. "I bid my insurance out every year to make sure the price is in line."
4. "Al is our Safety Director, he's not been able to do much of anything else around here."
3. "Employee training? The best way to learn is on the job."
2. "I have lots of claims I never turn in because I don't want my insurance rates to rise."
1. "Each year I expect to get my premiums back in claims."

Greg Vincent is the editor of Dealer & Applicator magazine