Farmers are enjoying a softer market, but protection remains patchy
By Miranda Maxwell
Stabilising premiums mask a growing underinsurance problem in rural Australia, regional brokers say. Large rate increases at renewal time are less frequent and there is more willingness from insurers to negotiate. Capacity, broadly speaking, is slowly improving.
Yet underinsurance is blighting the farm sector even as rates settle. Horsham-based National Insurance Brokers owner Abbie Wilson says her team is busier than ever with clients seeking guidance, demonstrating strong demand for intermediary advice.
But the temptation to take cheaper policies bought direct is leaving businesses exposed.
“The bigger issue now is underinsurance,” Ms Wilson says. “Too many people chase the lowest premium online without understanding what they’ve given up in cover.
“From a regional perspective, collaboration between insurers, regulators and qualified industry professionals will deliver better outcomes than decisions driven online alone.
“When policymakers listen to those working directly with businesses on the ground, we can achieve solutions that protect both affordability and meaningful cover.”
At the Bega office of MGA Insurance Group in New South Wales, Samantha Northey agrees underinsurance is an issue, particularly for large farms. Such clients are reducing sums insured or removing items from their schedules so they can afford cover, she says.
“Otherwise, they would just send themselves broke paying insurance premiums. They sort of have to weigh up what the likelihood of a claim is versus the cost of the premium each year so it’s sustainable for them.”
Premiums in the dairy region, which also produces beef cattle and sheep, are still trending upwards and her team is busy “having those hard conversations” with people near dense bushland who are lucky to secure cover at all without documentation of risk mitigation.
“A lot of [businesses] are right on the brink, struggling to hang in day to day at the moment.”
Liam Bache, MGA
Insurers have become more willing to revisit terms, though, whereas “probably about six months ago, it was just a straight no”.
“Now they’re like, ‘Look, we might have some room to move on the farm property section or on the houses,’ or something like that. For us, anything is better than nothing.”
Few have elected to buy insurance direct, she says. “Clients are relying on us more than ever – they’re looking at reducing covers, increasing excesses, whatever they can, to reduce that premium impact.
“They just rely on us so much to give them that guidance of what to do, and the claims brokers we have are fantastic, so that works massively in our favour – that peace of mind, they know we can help them with that.”
Despite a more benign catastrophe period since the 2019-20 record bushfires, Ms Northey says the claims team is kept busy. “The cost to repair and replace things is so much higher than what it was even five years ago … machinery claims, tractors and farm equipment. Still plenty of claims.”
In Yarrawonga, where the Murray River separates Victoria and New South Wales, broker Tim Clarke says premiums are softening in most sectors. Yet areas persist where it is hard to obtain cover, mostly due to bushfire risk.
“We still have areas in the domestic commercial markets where the client questions the viability of the insurance because they’re in those hard-to-place markets, whether it’s close to national parks, or in alpine regions such as Bright, Harrietville and Mount Beauty,” says Mr Clarke, who is principal at North East Insurance Brokers.
For farm-stay accommodation in pockets such as Arthurs Creek and Cottles Bridge, it is also hard to place correct cover, he says.
“The insurers are really concentrating on their flood and bushfire overlays … but the market is softer now. So hopefully we can pull some money back for our clients.”
In Clare, South Australia, MGA manager Liam Bache says drought conditions in the state’s mid-north are “some of the worst many people have experienced in their lifetime”.
“We try to keep as upbeat as possible. The last thing clients need is more doom and gloom.”
Liam Bache
Frost has also reduced grape crop yields in the Clare and Barossa valleys, and the community is feeling the knock-on effects of higher fuel, fertiliser and chemical costs, while commodity prices “aren’t really leaping forward”.
“Retailers feel the pinch with reduced spending,” he says. “Machinery dealerships have got a lot of stock sitting there that nobody wants to buy because nobody wants to spend the money.
“A lot of them are right on the brink, struggling to hang in day to day at the moment.”
The area is dominated by merino wool, general broadacre crops and some beef cattle.
Record March rain was a relief, but not enough to fix three years of below-average rainfall in the state’s agricultural areas.
“Even if seasonal conditions improve this year, there’s still the recovery time from a soil moisture perspective – we’re still looking at a two- to three-year financial recovery for a lot of farmers,” Mr Bache says.
The 2024-25 season was “really quite horrendous”, and this year was only marginally better in many areas, with average rainfall at best.
“They’re still behind the eight ball with the lack of subsoil moisture.”
Such challenging times have led policyholders to cut cover and self-insure on lower-value items.
“There are a lot of discussions going on around risk retention with higher excesses, rather than opting for those lower excesses where possible,” Mr Bache says.
“If things keep going the way they are, it’s really getting to crunch time … they’re going to have to make some decisions on what they’re going to leave off.”
On the plus side, Mr Bache says rates have been stable for a year or two, and the area has not experienced widespread losses.
“We have found the insurers have been really good, really understanding and being flexible where they can for those people who are under financial duress.”
Brokers too are going the extra mile. Mr Bache, who grew up in Clare, says clients appreciate having someone to provide advice and “be the voice of reason giving alternate options. We try to keep as upbeat as possible. The last thing clients need is more doom and gloom. We’re spending more time talking to clients.
“We do have an understanding and appreciation for what they’re going through, so it’s just offering a lot of support and committing the extra time to try to find a solution that works best and doesn’t leave them too exposed but is financially viable.”
He wants the South Australian government to adopt a stamp duty exemption on insurance for businesses with less than $2 million turnover.
“It would be nice to see some sort of relief through to them.”
Another headache for regional brokers is strata legislation in Victoria and New South Wales.
An owners’ corporation must insure for its building’s full replacement value, and an independent valuation must be completed at least every five years. Insurer
appetite is not keeping up with updated valuations.
“That’s causing a few issues,” North East Insurance Brokers’ Mr Clarke says. “We have clients doing the correct thing, and now the insurers don’t have the capacity to meet those requirements.
“The strata legislation says that they’ve got to have [the valuations], but the insurers have fallen behind in certain areas with their capacity to actually write the business after the valuation.
“You’re seeing very large increases in the rebuilding and replacement costs of particular buildings, sometimes 100%.
“Insurers can’t actually look after you and it becomes an even smaller market because of the valuations that have to be done. It will be a little bit different in the CBD areas, because capacity is available [there], but in the rural, regional areas and in the alpine region, it’s a real issue for us.”
Giving evidence at the federal government inquiry into insurers’ responses to the record-breaking floods of 2022, industry consultant John Trowbridge said home insurers should move towards offering total-replacement policies to tackle “systemic” underinsurance.
Insurers “don’t take any responsibility” for the accuracy of sums insured relative to replacement values, Mr Trowbridge said, and that has led to “chronic underinsurance”.
“Every time there is a disaster, we see it in the statistics after the event and there are all sorts of really terrible outcomes for people who are underinsured … Insurers should be offering full-replacement cover more widely,” he said, adding that as total losses are relatively rare, it should make only a minor difference to premiums.
Mr Clarke says that looking towards renewals, the market for professional lines has softened. But in property, the increased costs of rebuilding and replacement are “blurring” matters.
“We’ll just wait and see. Naturally, insurers aren’t going to come out and knock 10% off, but we’re just hoping they’re not going to increase. And as a broker, we’ll always have a look around for alternative markets – if there are ones, depending on what the risk is – and then hopefully forward savings on.”
