That will involve new and emerging risks with cyber, drones and sensors already being adopted and farmers diversifying into the likes of agri tourism and niche products and brands as traditional farming becomes less dominant, mutual insurer FMG says in a Future of Insurance report.
Increasing regulation and compliance will also increase liability risk.
FMG, which insures more than half the farm sector, expects a move away from capital gain as a primary wealth driver in agriculture because of limits on production to meet environmental rules and the influence of ethical consumers.
New ways to grow businesses will be formed, involving different risks and untested new ventures.
“Wider liability products and future-proofed advice will be needed to manage a more complex farming and growing operating environment.”
It noted that as climate change impacts grow, farming and horticulture will become more reliant on Government and industry agreements to underwrite business because farmers cannot insure for major pest and disease incursions.
Horticulture and crop insurance will involve more volatility as crops are grown in new areas and extreme hail and storms occur out of season.
Larger agri corporates are already exporting directly and involved in tourism and smaller businesses are also diversifying.
Farmers will be early adopters of autonomous vehicles for farm work.
There will be more horticulture infrastructure, machinery, cool stores and pack houses and new technology and more brands, products and farm IP to insure.
In the wider insurance economy in the last 12 to 18 months there has been a strong move to risk-based pricing and insurers exiting some selected markets, notably Wellington property, indicating a shift in risk appetite.
New Zealand isn’t immune from global risk sentiment and it is likely more extreme storms and natural disasters will occur.
The NZ insurance market can expect significant disruption in the next five to 10 years and possibly another major disaster in the next 20 years.
For the last 10 years the world reinsurance market was an easy place to get capital, even after the Canterbury and Kaikoura earthquakes.
However, the market is just one major event, local or global, away from big price adjustments with higher premiums and high excess costs.
With most insurers being Australian-owned, a major event in Australia could affect capital available in NZ.
The report said technology will lead to lower-cost models in the sector and teams and systems are being restructured as part of that.
However, old legacy systems are soaking up resources and making the change difficult to implement fully.
That is making existing insurers vulnerable to being overtaken by new business models and well-capitalised start-up offers.
Ethics will also drive regulators to take more oversight as insurers gain access to far greater amounts of information from clients that could be used to decline claims, exclude risks and cover only the best risks.
Balancing consumer expectations of fairness and profit maximising for shareholders will be the tension for the industry to navigate, FMG’s report said.
