Decline in SA farmers to have significant impact on insurance industry
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2012
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22
Feb
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The predicted decline in the number of farmers in South Africa from the current figure of 40 000 to 15 000 in the next 15 years* will have a drastic impact on the local agricultural sector, causing thousands of associated job losses and eventually raising the price of goods for consumers.
This is according to Nico Schoeman, General Manager of Branch Operations at Landmark – a specialist insurance underwriter, writing on behalf of Compass Insurance – who says the full impact of a decline in farmers will only be fully realised when the effect hits the consumer in the form of food shortage or escalating costs. “This decline will also impact severely on the agricultural sector including closures of specialist agricultural insurance companies and supporting networks, such as specialist agricultural assessors and other suppliers.”
He says that considering there is a current drive to create jobs across industries, this will have a huge impact on the local economy, particularly given that South Africa’s agricultural industry is a staple of the economy.
Schoeman says the shrinkage in the ‘pool’ of South African farmers may also result in an increase in agricultural insurance premiums. “As the pool of participants decreases, it becomes more expensive to insure and service this client base. Unfortunately, this may result in farmers exposing themselves to greater risks, as they choose to not take out adequate insurance cover as a means of saving money in the short term. Ultimately, these people will find themselves in an even worse financial predicament when the need for insurance cover arises.”
“The majority of farming operations remain heavily dependent on weather, with the most common claims currently being seasonal by nature. These kinds of claims cannot be avoided and according to our claims statistics are on the rise. Storm, wind, water, hail and lightning claims are the most common and with incidences increasing, the need for farmers to have adequate insurance has become ever more critical.”
He says that in addition to weather-related claims, the deterioration of the road network in the areas in which many farmers operate is also having a major impact on claims. “The continued use of these roads will have a huge impact on the condition of the vehicle, no matter how robust or strong it is, which will eventually lead to an accident. This can also be confirmed by the increase in the number of agricultural motor claims arising.”
“As with any business venture, risk management in all areas of the farming operation is of utmost importance and will become even more so as time progresses. In this regard the value of an accredited insurance broker to advise the farmer on his individual and unique insurance needs must not be underestimated,” concludes Schoeman.
*According to Absa agribusiness General Manager Ernst Janovsky
Source: Empire Communications (a division of Epic Communications (Pty) Ltd)
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