According to Jonjon Smit, director of CIB Insurance administrators, climate change and unpredictable weather patterns such as the current heat wave and fires in the Western Cape and flooding in Mpumalanga and Limpopo, will continue to threaten the financial survival of farmers who do not have effective risk management policies in place in 2012.
"The South African Weather Service has warned that people in most parts of the country should prepare themselves for heavy rain and 'strange weather' in the next three months," Smit said. "As a result, it is crucial that farmers speak to a specialist broker who can assess their risks and advise accordingly." He added that underestimating the replacement value of farming equipment, combined with a failure to regularly review their policies, means that the percentage of South African farmers who are underinsured could be as high as 70%. "[W]e estimate that between 60% and 70% of farmers are underinsuring their key assets," Smit said. "The result is that many farmers could face financial ruin if they are unable to afford to replace these assets."
Smit told The New Age>/i< that one of the key reasons for farmers being underinsured is the rapid increase in the cost of agriprocessing equipment, vehicles and assets in recent years as technology and functionality have both improved. Smit warns that farmers who use older equipment or undervalue their assets do not take into consideration the current value of replacement equipment. A good idea, Smit said, is for farmers to ask their broker to carry out a full needs analysis based on their particular circumstances, which will identify their specific risks to each farm. "This could assist farmers [...] to ensure they are at least covered for the most necessary risk."
Read the full article on www.thenewage.co.za.
