Industry stakeholders say the increasing diversification of small commercial farms is driving risk management and insurance opportunities for insurance brokers. This diversification trend, they say, is a result of farms needing more income sources to survive but also the next generation looking for new business opportunities. The diversification can involve adding different farming operations but also new ventures, like agritourism. These new activities can call for extra insurance and risk management that goes beyond the farm’s usual covers.
“Yes, there’s a massive opportunity out there, absolutely,” said Kylie Stephens (pictured above), managing principal of PSC Insurance Brokers Darwin. Stephens has a decade’s experience in farm insurance, from South Australia to the Northern Territory.
The diversification, she said, can involve core farming operations. Some small farms, for example, are shifting to mixed enterprises, combining livestock, cropping and horticulture. Others are moving to high-value crops such as berries, avocados and specialty nuts to grow alongside traditional grains and livestock. Other small farms are also capitalizing on organic and niche markets and producing commodities like organic beef and specialty fruits.
Stephens said an underlying driver of the diversification can be sheer economic survival. “In South Australia, it's very hard to make an income just off their livestock, so they've got to offset that with cropping,” she said.
James Hooper, managing director of underwriting agency Rural Affinity, said that pricing and affordability “has been a big issue” for small commercial farms in recent years and agreed that more smaller farming operations are diversifying, which adds to their risk management and insurance needs.
Stephens said the farm pack can still offer these diversified small commercial farms a baseline of cover with its range of policy classes – but it usually won’t be enough. “So you've got your property, theft and general farm property which can ensure your fencing, hay and grain,” she said. “Then it can also cover your mobile machinery.”
However, when these farms diversify and combine cropping with livestock for example, the farm pack may not be sufficient. “You might need the stud stock policy for the higher valued animals,” said Stephens. “Standalone covers for high value working dogs might also be needed.” She said farm packs are very outdated when it comes to insuring working dogs, and she should know – Stephens arranged the insurance cover for Hoover, the kelpie working dog that set a record in 2021 for the most expensive working dog ever sold at an auction when he was bought for more than $35,000.
“Same with your horses,” said Stephens.
But many small commercial farmers, she said, are already accustomed to having multiple policies outside the farm pack, sometimes with several different insurers. “You're dealing with a totally different insurer that's doing the cyber or the management liability,” said Stephens. “It would be far too hard, I think, to get a farm pack insurance policy to cover everything, and as a broker, it's probably not something I'd want to see either.”
The diversification risk challenge is becoming more complicated as increasing numbers of farmers also engage in activities that are not directly farming-related.
“For small farms these days, they're sometimes not quite large enough to be getting a full income off the farm,” said Stephens. This means more small farms are taking an extra diversification step and engaging in business that is not directly connected to commercial farming activities. Economic necessity but also generational change can be drivers. Stephens said this is increasing risk exposures.
“The next generation can be more business savvy and are more likely to have been to university and want to take the farm to the next level,” said Stephens.
More farming operations are offering agritourism which can involve opening doors to visitors for farm tours, pick-your-own produce events, or educational workshops. There’s also value adding to existing products – so instead of selling raw produce, some farms are processing crops into jams, sauces, or baked goods. Others are focusing more on specialty crops like herbs, mushrooms, or organic vegetables and selling them at local farmers’ markets, restaurants or via subscription boxes of mixed farm products directly to consumers.
