Flood affected farms count cost of underinsurance

Torrential rain in certain parts of South Africa over the past couple of weeks has resulted in increased flood-related damage to property and farming equipment, as well as a sharp rise in agricultural-related insurance claims. As a result, farmers are being urged to review their insurance policies and to prepare for the rainfall that is expected to continue.

According to Johan Schoeman, Agri Specialist at CIB Insurance Solutions (CIB), there has been a significant increase in agricultural claims as a result of the adverse weather conditions experienced in the past couple of weeks.

“Farmers in KwaZulu-Natal and the Northern Cape have been hit the hardest, sustaining an estimated R300 million and R50 million in damage respectively. After government announced that it will not be compensating for any flood damage caused by the rains so far, farmers will definitely lose out financially.”

He says that that CIB has already processed a number of claims that have been covered in terms of CIB’s standard policy wording, which includes building damage and machinery used on river banks. They are however, still waiting to assess the loss of harvested stock that has been ruined whilst in storage.

According to research conducted by the company in 2010, underestimating the replacement value of farming equipment, combined with a failure to regularly review their policies, means that the percentage of South Africa’s farmers who are underinsured could be as high as 70%. “This is a real concern after the major damage caused in the past month.”

Schoeman also says that the floods will have a material impact on the agricultural industry during 2011. “It is still too early to determine the extent of the overall damage, but once the water levels have dropped it will be possible to make an accurate assessment on how much has been lost.”

He advises farmers to regularly review their policies to ensure that natural disasters such as the recent flooding will not bankrupt them. “I would recommend that a client contacts a specialist agricultural broker, who can do a full risk evaluation and give advice on the precautions, potential threats and the insurance required to cover weather and natural disaster-related claims.”