Agribusiness is often viewed through a narrow lens, mostly associated with farmers and row crops. But as the industry has evolved, it has become a multi-faceted field encompassing everything from growing and packing to shipping, importing, and distributing.
As a result, agribusinesses face an ever-growing list of exposures including cyberattacks, pollution, and product contamination.
“The umbrella is much broader than most people truly understand,” said Cole Hubka (pictured), managing partner of the food and agribusiness division at Insurance Office of America. “You can have very turnkey clients—they grow, pack, ship, and harvest. Anything food-related has to do with agribusiness.”
Alongside the increasing variety of risks, agribusinesses must also grapple with an insurance market that’s increasingly difficult to navigate. A slew of costly natural disasters in recent years, such as hurricanes and wildfires, have also created an especially hard market.
According to Cole, the pool of carriers willing to cover agribusinesses is “getting smaller and smaller,” as insurers that previously dominated the space have pulled back from regions like California and Florida due to legal and environmental concerns. This shrinking pool means fewer options for agribusiness companies to find appropriate coverage, and carriers that remain are asking for higher premiums for riskier locations.
One common thread that runs through nearly every agribusiness operation is the potential for contamination or product recalls. These are massive concerns because of the ripple effects they can create throughout the entire supply chain. The risk of contamination means companies must always be on guard for foodborne illnesses or other safety violations that could lead to expensive recalls.
“You have an element of manufacturing, an element of processing, and maybe just handle the transportation side,” said Hubka. “There’s so much reliance on these elements; one mistake can affect the entire chain.”
General liability coverage is one of the most crucial forms of protection in agribusiness, especially when it comes to bodily injury. This protection is essential because even with tight risk controls, things can and do go wrong. However, many policies have exclusionary clauses that may not cover certain situations - something that agribusinesses need to be acutely aware of, Hubka noted.
The challenges don’t stop at contamination or injury. As technology weaves itself into every aspect of modern business, agribusinesses have become prime targets for cybercriminals.
Agribusiness, traditionally very labor-intensive, is being transformed by technology. For example, instead of workers in the field spraying pesticides or using aerial methods, companies are now investing in high-tech equipment.
As an example, Hubka shared that a client recently bought a $1.2-million tractor with advanced optics and lasers that identify and remove weeds, addressing pollution concerns while automating labor. “As technology advances, it’s changing how agribusiness manages its operations, from growing and harvesting to environmental control,” he told Insurance Business.
“This also raises important insurance questions. For instance, how does an inland marine policy for a tractor, which used to be a simple piece of equipment, now account for the fact that it’s essentially a highly sophisticated computer? That brings in the potential for cyber risks.
“Our industry, unfortunately, is often slow to adapt, and many policies don’t yet reflect the complexity of this modern equipment. (Agents) need to ask if there are exclusions in traditional policies. What happens if this tech-heavy machine gets damaged by something like lightning, or even a cyberattack? It’s an evolving area.”
Aside from data breaches, fraudulent activities, especially logistics fraud, are a growing concern. Cybercriminals are increasingly using phishing tactics to reroute shipments or convince companies to wire large sums of money to fraudulent accounts.
Understanding the complexity of the industry is crucial to grasping the immense risks agribusiness companies face today. The evolving nature of agribusiness operations means they are often overinsured in some places and underinsured in others, according to Hubka. Agents must work with agribusinesses to help them understand their risk profile and find value propositions to remove coverage or add it where needed.
“The core of what we do is helping clients identify where they’re overinsured, underinsured, or exposed to liabilities that could be covered by an insurance policy,” he said. “At the end of the day, an insurance policy is about transferring risk - you’re paying a premium for the carrier to take on that risk in the event of a loss. Through these discussions, clients might choose to self-insure certain risks and allocate their insurance budget elsewhere.
“In this hard market, policies come with limitations, so it’s important to ask: What’s your budget? What can you pay? What risks are you willing to self-insure or take on through deductibles or retentions? Is the premium worth transferring the risk, or is it something your business can manage and prepare for?”
While the insurance market remains tough, agribusinesses can mitigate many of these risks with careful planning and strong risk controls. The first line of defense, Hubka said, is good risk management and contractual protections.
Knowing which vendors and partners your business works with and what their own insurance policies cover is essential. Contracts between growers, shippers, packers, and vendors must be airtight, leaving no room for ambiguity in the case of a claim.
“Insurance policies are only there to… protect the client when something goes wrong,” Hubka said.
Are you a broker in the agribusiness space? Please share your thoughts on the biggest risks facing the agribusiness industry today.
