With farm profitability continuing to be under pressure from inflation and low incomes, everyone in the industry is looking to cut costs where they can. However, when it comes to insurance, it is still critical to have the correct cover in place – the worst insurance policy is always the one that doesn’t cover what you need it to.

If a policy seems considerably cheaper than what you are currently paying, there is a chance that it is cheaper because it is giving you much less cover.

When shopping for insurance, the Competition and Consumer Protection Commission (CCPC.ie) and the Money Advice and Budgeting Service (mabs.ie) websites are good places to start so you know your rights – as well as what questions to ask and how to save money.

Getting the basics right

Whenever any policy comes up for renewal, it is worth your while shopping around before committing. Even if you are happy with your current insurer, or broker, a lower quote from another company may lead to a discount on renewal with your current provider.

In 2022 the Central Bank banned a practice among insurance companies known as “price walking”, where the company charges more to customers who renew with them every year. Basically, customers were charged a higher premium for no reason other than staying with the same provider. It could be seen as a loyalty penalty.

A review by the Central Bank at the end of last year found that the ban has been effective and that customers on their second or subsequent renewal are no longer paying higher premiums than new customers would. However, this should not discourage anyone from shopping around – a few hours spent getting the right policy at the right price could still save hundreds of euros.

Other things to consider

  • Start shopping around as soon as you receive a renewal notice to give yourself time to get a range of quotes. Make sure, however, that you are less than one month from renewal date, as price quotes may not be valid for longer than that.
  • Carefully check things, like the excess on policies when comparing them (excess is the amount of any claim the insured will have to cover before insurance payments begin. The higher the excess, the cheaper the policy should be).
  • Check providers for the size of discount they give for having multiple policies. A farmer will almost always have a range of policies, so worth getting any discount available.
  • Do not, if you can avoid it, pay for policies in instalments. The interest rates charged by the insurance companies can be very high, adding further expense to an already large financial commitment.

    • The Consumer Insurance Contracts Act of 2019 says that when applying for a policy, a consumer must answer all questions asked by the provider “honestly and with reasonable care”. This, from a legal perspective, is a significantly lower standard than the previous legislation, which demanded questions are answered “in utmost good faith”. When renewing a policy, a consumer is only obliged to answer questions from the insurer. There is no obligation to volunteer information.

    Further, the 2019 act states that any misrepresentation by a consumer has to be fraudulent before the insurer can avoid a payout on a policy. If the misrepresentation is negligent or innocent, then the insurer will have to pay some or all of any claim.

    If you are using a broker, then ask the broker how many quotes they will look for before providing a policy. With so many price comparison websites available these days, the job of searching for quotes is considerably easier than it used to be.

    Finally, it is critical that you buy sufficient cover for whatever you are insuring. Insurers will only pay out on the insured sum, or may only pay out on the percentage of the asset that is covered. Being under-insured can be a serious shock and usually one that comes at the worst possible time.

    Under-insurance

  • Inflation has caused under-insurance to become a significantly larger issue for property owners in recent times. The rapid acceleration of prices for everything involved in rebuilding homes or farm buildings means many policy holders have become under-insured by not updating the amount of cover they have.
  • The Irish Central Bank recently released a report on the issue, showing that under-insurance has grown from 6.5% of claims paid in 2017, to 16.5% of claims in 2021. Of the under-insured claims in 2021, the average amount of under-insurance was 19%.
  • 19% under-insurance means that someone whose house rebuild costs were €500,000 would only have €405,000 paid for by their insurer, leaving them significantly out of pocket.
  • It is important to understand that under-insurance applies whatever the size of the claim. If your house rebuild costs are €500,000 and you are insured for €400,000, then your insurer is only obliged to pay four-fifths of any claim. So, for example, if there is €100,000 of storm damage done to your house, the insurer will only have to pay €80,000.
  • The Central Bank report only looked at data until 2021. Latest numbers from the Society of Chartered Surveyors show that construction costs continued to rise more recently, as raw materials and labour remained expensive.
  • The Society of Chartered Surveyors provides a regularly updated insurance rebuild cost calculator on its website (www.scsi.ie). It is notable that the costs of rebuilding – and therefore the amount of insurance needed – can vary significantly due to the part of the country your property is in.
  • Both insurers and brokers have an obligation to ensure their clients are properly informed about the risks of being under-insured and to give clear information on how to avoid that risk.