Guardrisk provides tailor-made insurance for local grain farmers

18 July 2019

The Agnovate Multi-Peril Yield Insurance product is designed to mitigate risks specific to the South African agricultural industry.

Guardrisk, in partnership with Agnovate, has launched the Agnovate Multi-Peril Yield Insurance (MPYI) product, which is tailor-made to address the specific risks and needs of the South African grain production sector.

Richard Eales, managing executive of Guardrisk Insurance, explains that the local agricultural industry is exposed to drought and other weather-related risks.

“Large parts of South Africa’s grain production regions are rain-fed and vulnerable to drought and grain price volatility. This leads to volatile output levels and severe financial pressure across the value chain,” he says.

To mitigate and reduce financial risks, the new-generation crop insurance product is based on state-of-the-art technology, which is suited to the modern farming client.

“Traditional crop insurance products, such as multi-peril crop insurance (MPCI), are often not best suited to the South Africa’s grain industry. MPCI does not adequately consider the large variety of soil types, climate regions and farm operation sizes, which poses practical challenges and results in high administration costs,” says Eales.

He adds that Agnovate MPYI moves away from the traditional model used to analyse risk, structure insurance rates, the methodology applied to assess yield shortfall and the calculations to settle claims.

Eales explains that there are some key differences between MPCI and Agnovate (MPYI).

“MPCI insurance rates are structure on the historical yield performance of an administrative region, such as a municipal district, province or broad climate regions. It can also be structured on the historical yield performance of an individual farm,” he says.

On the other hand, Agnovate MPYI calculates insurance rates according to the historical yield performance of a predefined production area, which considers similar soil and climate in one geographical area.

In terms of claims, Eales points out that MCPI claims are based on the assessment of yield shortfall on individual farms and fields. “This process is time consuming, costly and sometimes inaccurate,” he says.

Agnovate MPYI claims are based on the weighted average of yield shortfall, determined across the production area.

Eales says that in terms of the payout amount provided through the Agnovate MPYI cover, clients pre-agree to absorb a percentage of the total financial loss themselves. “This is the deductible and forms part of the claim calculation. As soon as the determined loss exceeds the agreed deductible amount, the insurance cover starts to generate a claim payment to the client. Clients can also pre-agree to add a maximum payout limit tailored to their needs.”

Agnovate MPYI covers all perils, except hail, that may result in a yield shortfall across a production area, even when these happen simultaneously.

“Although the impact of hail will reflect in the actual yield determined in a production area, it will not be a true reflection of the hail damage sustained on a specific farm. It is advised that clients purchase separate hail insurance cover,” says Eales.

He points out that South Africa has one of the best researched and well-documented agricultural industries in the world.

“Not only do we have a very well-organized agricultural industry, with excellent leadership organisations, our farmers also enjoy a reputation for masters of their art, which they built up over more than a century in one of the world’s most difficult agricultural production regions. This solid base must surely enable us to design sustainable drought insurance products for our farmers,” he says.