New insurance to offer payouts on poor yields

Picture for crop insurance story
Picture for crop insurance story

A new insurance policy to compensate farmers against poor crop yields has been launched.

Crop shortfall insurance, provided by rural insurance firm Lycetts and Farmers & Mercantile Insurance Brokers (FMIB), will automatically trigger payouts if extreme weather causes yields in their area to fall below the historic average.

It is thought to be the first policy of its kind in Britain to insure shortfalls in cereal and oilseed rape crops.

“At a time when arable farmers are facing increasing market volatility, unpredictable weather patterns, along with uncertainty over post-Brexit subsidies, there is increasing demand for financial protection against burgeoning risks,” said Lycetts rural divisional director Rupert Wailes-Fairbairn.

He said the insurance was available either to cover a farm’s total crop output or individual crops such as winter oilseed rape, winter wheat, or winter and spring barley.

The insurance compensates farmers for up to a quarter of the shortfall of their projected crop production for the harvest year in question.

The index policy is based on Defra data, with a deductible of either 10 or 15% of production.

The payout is calculated on the reduction in output volume, based on the fall in regional yield for the harvest year, relative to the regional yield over the last eight years.

Lycetts and FMIB said unlike traditional insurance, where insurers must survey the damage, the crop shortfall insurance allows for a quicker, and more objective, claims settlement process.

Will Kendrick from FMIB said: “The feedback we’ve received from our agricultural client base is that sector volatility is having a seriously detrimental impact on long-term planning, investment and business sustainability.

“Crop shortfall insurance offers peace of mind, sitting at the heart of urgently called for risk management solutions to help mitigate the worst excesses of this volatile environment.”