What your farm needs to know: ag insurance with Mark Santas

Narrator: The Ag View Pitch is created by Ag View Solutions to provide value to its clients and farmers like you. We'd like to welcome our new listeners today and encourage you to check out our other podcast on The Ag View Pitch, which can be found on Apple Podcasts, Anchor, and Podbean. You can also find us on Facebook at Ag View Solutions and online at agviewsolutions.com. Enjoy.

Shay

Foulk: Welcome back everyone to the Ag View Pitch. My name is Shay Foulk and I'm joined here with special guest today, Mark Santus, and he works in the insurance industry. I'm going to go ahead and let him introduce himself. I feel really good about the conversation we're going to have today and looking forward to it. Thanks for joining us here today, Mark.

Mark

Santas: Thank you, Shay. I, I'm honored to be on your podcast. My main office is in Beloit, Wisconsin. I have 3 other locations Uh, we're an independent insurance agency. We represent quite a few carriers, and about 15% of our business is agricultural, mainly hog and dairy.

Shay

Foulk: Great. And are your locations all there in Wisconsin, or are you throughout the Midwest?

Mark

Santas: Um, I have 3 in Wisconsin and 1 in Illinois.

Shay

Foulk: Awesome.

Mark

Santas: Great. In the same region.

Shay

Foulk: Gotcha. And how long have you been involved in the industry? Can you tell us a little bit about your story there?

Mark

Santas: I've been in the insurance business since 1985, and on the agricultural side, we do a lot of large commercial, and one of our clients got into the pig business. One of our large veterinarian practices got in the pig business, so we were forced to learn from the ground up and never looked back. I enjoy the farm side of the business.

Shay

Foulk: So you've been involved in that for about 20, 25 years now, I think you said?

Mark

Santas: Yes, yes.

Shay

Foulk: Great.

Mark

Santas: 25 years on the hog side.

Shay

Foulk: Okay, well, I think we're talking to the right person then. So just wanted to have a little conversation with you here today, Mark, on, you know, maybe what's going on in the industry right now. I know we've seen some, some rate hikes in different areas. Can you tell me a little bit about what's going on on your end?

Mark

Santas: That's an interesting conversation because You know, whether it's in the Midwest or on the, on the coastal properties or the fires in California, the reinsurers are having rate increases on the property side and on the auto side, whether it's commercial auto or personal auto. And the main reason for the rate increases on the farm side this year seems to be for fires. However, in the northern part of the country, up in Minnesota and Wisconsin, we had some pretty brutal winters. And so, ice damming, we had some substantial collapse of the roofs up there, just because of the abruptness of the weather. And then, the fires last year were pretty bad. And I think, unfortunately, I think part of the conversation is the lack of maintenance on the dairy side. We're seeing a lot of electrical fires.

Shay

Foulk: Yeah, that's really too bad.

Mark

Santas: I know. Yeah. On the auto side, unfortunately, we all have smartphones and inattentive driving is making the auto loss ratios a little bit challenging, but not just because of cell phones. Also, there's other things that we do which is distracted driving. But then the cost of the vehicles, the repair cost. As well as just simple things like airbags. If your airbags go off, that's quite an expense for the carriers to absorb. But those two lines are the main lines that are causing rate increases this year.

Shay

Foulk: So now this might be something that farmers and producers out there have already seen or can be looking for as they look at, at new premiums in their insurance. Is that correct?

Mark

Santas: And that's a great— that's a great question. Yeah, on the property side, we're seeing between 4% and 10% increases on property. And even the better risk are seeing the rate increases because that's what insurance is. We sort of spread the risk in the business. But one— there are ways of being proactive to try to minimize that rate increase. Similar to the auto side, we're seeing between 4% and 15% rate increases on the auto side. And one of the things that we've been recommending to people is consider data mining. And the simple, the simple explanation of that is consider installing not only driver behavior of your employees, but also cameras, not only recording the outside, but also the inside driver. Because when you have a semi If you're in an accident, you almost are guilty until proven innocent, and having those cameras can be really worthwhile.

Shay

Foulk: Right, and I know a lot of producers that are considering that option, and some are actually a little bit fearful, not necessarily that they have bad drivers, but if an incident were to happen that they were at fault for, as far as liability, how does that go on their end on what they are required to provide? When it comes to a legal standpoint. Can you touch a little bit more on that, please?

Mark

Santas: Oh, I think that's a great question because it's kind of a double-edged sword. So we had a pretty bad accident a few years back where a truck was pulling out of a field and a person was driving over the hill quite fast, ran into the truck, and boogered himself up pretty good, and that was a pretty sizable claim. Had there been some cameras which could have recorded it, would have helped defend our trucker, because certainly in the agricultural world, you're entitled to be able to pull out on the road, and cars are expected to drive prudently out in the country as well. Take it the other step though. If you're at fault, a lot of times statistically, the longer The insurance company ignores a CAT claim, the more chances of that other— that third-party lawyering up, and then the claim is going to be more expensive.

So admitting— having that information where we know right away that we're at fault allows the insurance company to try to negotiate to minimize the cost of the claim.

Shay

Foulk: Okay, so maybe taking it from the approach of mitigating the risk up front instead of worrying about it on the back end of hoping, you know, that that information isn't out there for everybody to access. And maybe that leads into the question of how long are those that are implementing these systems— how long are you required to maintain those recordings in the event of an accident, and are you required to maintain them?

Mark

Santas: I've seen some demonstrations from various companies on the data mining And a lot of times, the device that records the vehicle's use, whether it's a fast start, a fast stop, or whatever, a lot of times that if there is an incident, it automatically records like the last 11 minutes. And so there's no hard and fast rule how long you keep that, but you certainly want your insurance company to have access to it. I mean, that's why you're doing it. Right.

Shay

Foulk: That makes sense. Now, one other thing that we had talked a little bit about offline here was rate adequacy and how that's affecting those who live in the rural community. Can you speak to that a little bit more?

Mark

Santas: Yes. So in the rural homeowner and the small family farm market, you're— You're not seeing the rate increases this year that you might have seen 4 or 5 years ago. I think the insurance market has an adequate rate for the home and the buildings in the rural. So when I say that there's like a 4 to 9 to 10% rate increase on property, that's because of the storm activity, but we're certainly not seeing the rate increases we were seeing 5 years ago or so. So I think that that market is fairly stable right now. I think the insurance companies are getting where— what they feel they need to in order to have enough money to pay the claims.

Shay

Foulk: Okay, great. No, I think that— I think that's good. And looking at how those rate increases might affect those who are listening and the farmers and producers that we work with out there, I think it's good to have a heads up on that. I was wondering if maybe we can steer the conversation towards Looking at how operations currently, uh, farms in particular, and historically have, uh, maybe had a little bit less coverage and not been involved with their insurance agency as they are today. And we're seeing the trend moving towards that of looking at it more as a commercial operation and a little bit more on the business side to make sure they're protected. Can you speak to how that movement has looked in the last 25 years that you've been involved with ag? Where we stand today and where you think the future of that will be.

Mark

Santas: I think that's an excellent comment. The insurance industry has really been a little slow for the family farm who has grown, because if you look at statistics, 55% of the family farms— I think there's about 2 million farms in the United States— and 55% of those farms actually that's their main income. So 45% of the farms, that is not the family's main income. And in addition to that, on the 55%, I think the average farm acres is around 450. So the insurance industry has been a little slow to respond because, you know, you look at the big carriers, the Travelers, the Hartford, the Nationwides, they have a large farm package like a commercial package. But you know, you get the Rurals and the Hastings and some of these regional mutuals, and they've been a little slow because as your farm grows, your insurance needs have changed and you have some commercial exposures.

And a good example is loss of income and extra expense. If you've got a large production a large productive facility, let's say with 2,000 head of livestock in it, if there is a major fire there, not only did you lose the facility, but you lost the 2,000 head, potentially the 2,000 head as well. So now you have to negotiate with a contractor to demolish it, to clean it up, to build a new building, to repopulate your facility, and some farms may have debt, so they've got some some income that's necessary in order to pay the debt service, but in addition to that, the extra expense to expedite it so that they can maybe move a herd or start pop— repopulating space somewhere else where they can rent. In the— and the reason I say that is because in the commercial world, statistically, 1 out of 2 businesses that have a major fire or a major loss fails.

And in the farm market, the insurance company has been slow to addressing that exposure. So it goes beyond just the loss of business income and it goes into the large dairy operations where we've got all that expensive diagnostic and sophisticated equipment to run it. There's different endorsements that the old farm policies didn't cover that we now need to be aware of and insuring properly. You know, you've got combines that cost $1 million and they need to be insured properly. The industry was slow to respond to some of that.

Shay

Foulk: Yeah, and I'm going to go ahead and repeat what you said there just to drive this home to those listening. Businesses that experience a large loss, statistically, 1 of 2 of those businesses will fail. Am I hearing that correct?

Mark

Santas: Yes.

Shay

Foulk: Wow, that's pretty incredible. And I think that might have some listeners thinking twice out there today of, you know, are we adequately covered? Is this something that we need to be looking more into? And, you know, establishing that relationship with the insurance provider, because that's someone that you don't want to talk to only when you have to. That's someone that you want to maintain a relationship with so that if you have any, you know, like you mentioned, the sophistication— farms are getting more and more sophisticated.

Every year we have major business changes, and so having that relationship with your insurance provider to actually go over every item on the list every single year to make sure you're hitting all those points and then updating them, you know, maybe even having a monthly conversation of, you know, things are going well, we don't have any changes, or, oh, by the way, we did have this happen, to make sure that you're covered for those things. And one note that I want to hit on there is you and I were talking a little bit offline about peak season products, and like you mentioned with the livestock, you know, you have livestock in and out of units and the coverage that you need to have on that. Can you talk a little bit more about how that affects producers and what they need to be thinking about when it comes to those items?

Mark

Santas: Yes, I'd like to go back and just mention one more thing though on the large loss issue. It goes beyond insurance. One of the things that we like to address is a contingency plan. What if? What's your disaster plan? If there's a fire, what are we going to do? Because it's one thing to have an insurance company show up with a check. It's another thing to have a plan of action to know what is necessary so we don't become that statistic.

Shay

Foulk: Yes, absolutely, that's a great point.

Mark

Santas: Answering this question on the inventory level, I think this is a This is very interesting. So, you know, a lot of your listeners right now are going to start to fill their, fill their inventories up, and so the high watermark for their corn or soybeans or whatever, it's now, and this is where you need to make sure you have adequate coverage, adequate controls, and then lower those values as you start sending your product to market. Because if you're not managing how much inventory you have or how much you're insuring it for, that can really, that can really cost you a lot more insurance.

Shay

Foulk: Now, is that something, I mean, is that just a phone call that producers can call in and say, hey, by the way, I don't have $3 million in product, I now have $2 million in product, or what does that actual process look like from an insurance provider standpoint?

Mark

Santas: Most carriers call that a peak season coverage. So a lot of times, especially now, you're starting your peak season coverage from October and the end of— the end of January you're lowering that. So that's where you get together with your agent, where your peak season and where your— if your inventory is that heavy, then having a monthly conversation with your with your carriers a good idea because what if it goes beyond January? What if all of a sudden the market tanks and you need to hold on to your product for a couple more months? So, but that is— that endorsement is called peak season, and the carriers will give you a credit based on the average amount of time that you need that high-water mark.

Shay

Foulk: Okay, great. Now there might be some people listening right now that some of this, it might seem like a lot, or maybe they haven't had experience with it. So let's maybe take a step back and, and look at this. If they haven't traditionally had this in-depth of a relationship with their insurance provider, if they don't know the coverages that they might need additionally, can you talk a little bit on, you know, how does a farm operation implement those changes? You know, how do you decide to make that change?— what factors do you need to look at for making that change and just how do you know? How do you know if your fund is at the point to where you need to be seriously considering some of this coverage? Maybe what are some of the key points that you need to be looking at?

Mark

Santas: We call it the risk assessment survey. It's really taking the time to discuss every aspect And there's services out there that provide this value to us agencies, but it's a risk— it's called a risk assessment survey, which takes quite a bit of commitment to both parties to go through to make sure that all of the areas that we should discuss are discussed. And then if that exposure exists, but you might want to self-insure it, we can mark that. But there's, there's good tools out there that can address all the exposures that you probably have in the ag world. Okay, this is primarily from property liability, auto, work comp, even directors and officers on a large corporation where there's multiple shareholders.

Shay

Foulk: Great, so just making sure that you have an in-depth risk assessment that really looks at everything that you have going on in the operation. Yes. Okay, great. There's a couple other points that are maybe a little scattered here from the format that we've had, but I, I think would provide value to those listening. And I was wondering if you could touch on some of the complexity of the workman's comp issues that you see with agricultural operations and maybe some things to consider in regards to that.

Mark

Santas: I think for the farm market, workers' comp is probably one of the most misunderstood coverages because if you consider what workers' comp does but also what it protects. So most states have a limitation. So some states, if you have less than 5 employees, you're not subject to the Work Comp Act. Some states, it's 5 or more. But in my opinion, workers' comp is, is a great risk management tool because the main reason is most states have what they call sole remedy, meaning that if work comp is responding to an employee injury regardless of fault, that employee is no longer allowed to sue you. And that's what we call sole remedy.

And so If you just happen to be a farm and you've got 4 employees and you're not purchasing work comp and, you know, statutorily it says you don't have to purchase work comp, if that employee gets hurt, there's a potential that that employee can sue you under tort law. So I'm a big proponent that work comp is— it's an infamous— it's a coverage part that covers whatever exposures the state says that you're exposed to. And so it's, in my opinion, a small price to pay just to make sure that you're not going to get sued. Because the problem with getting sued is you never know how much exposure you have. Could be $100,000, it could be a million dollars, you don't know. But work comp limits what your exposure is.

Shay

Foulk: Yeah, that's a really good point there. I think you probably just opened some people's eyes on that, on is, you know, is it worth the coverage? Well, yes, it is, absolutely, in order to ensure that you're protected. One other thing that I think we should touch on a little bit and something that Ag View Pitch works on— well, excuse me, Ag View Solutions works on with a lot of the clients is looking at collaborations and maybe some gaps in coverage that might exist there with those collaborations. A lot of what goes on in agriculture and the farm industry today is not based on a formal agreement. It's a handshake. It's a general understanding of We're either providing this product or this service at this location, and there's maybe a little bit more of assumed risk there than is necessary.

Well, I would argue a lot more assumed risk than is necessary with simple steps that you can take along the way. Can you speak a little bit to how working with your insurance provider closely, like doing that risk assessment survey, help with those gaps in coverage with collaborations and why it's so important to have an insurance provider involved in that.

Mark

Santas: Sure. I think farmers, like contractors, have an inherent trust, a handshake agreement. Two farmers, they're neighbors. One farmer needs a skid loader for a day and the neighbor just says, yeah, come on over and get it for the day, or, you know, maybe you've got the neighbor who's gonna spray your property, your property lines or whatever, shared crop agreement. And the thing I always try to get people to understand is you're not dealing with handshakes anymore. You're dealing with two insurance companies, and they're the ones who control whether the whether the claim is gonna be covered or not. And most insurance policies don't allow you to just let your neighbor use your tractor in a pinch.

Now that doesn't mean that they can't, there's endorsements for that, but the insurance policy is, the spirit of the policy really doesn't want you to be lending all your equipment to your neighbors because that's not what they underwrote. So yes, that assessment, the assessment would help identify that. But even more than that, on the liability side, if you're doing, if you're spraying your neighbor's property, your liability may not cover that because incidental farming, there might be a limitation on the policy that doesn't allow you to have that exposure. Because the insurance company doesn't want to cover it. We had a large— we had a farm, they thought they were spraying with a fertilizer and they ended up spraying a whole field with Roundup. And that didn't turn out very well.

Shay

Foulk: I can imagine not. Wow, yeah, and that's, you know, making sure that you have that extended coverage and running it past. And a lot of farmers out there might be rolling their eyes or thinking, man, that sounds like a lot of work in order to do something simple like that. But I think it only takes one major event for you to realize that, uh, we need to be covered on these things.

Mark

Santas: Well, and to take that even one step further on the liability side, so pretend you're a contractor for a minute and you hire a carpentry contractor. You're only as— your subcontractor agreement is only as good as the person you're subcontracting to financially. Fulfill those promises that they promised. And this goes with on the liability side. If someone's using your tractor, are they covered while they're on the public road on their policy? Does your policy pick that up? How is, you know, that, that can be very complicated.

Shay

Foulk: And, you know, that was a point that I wanted to bring up here too, is if you have contractors or subcontractors working on your farm, particularly this time of year, if you have someone working on your bins or your dryer, maybe they're doing some gravel work in the yard or running tile lines around your properties, you need to make sure that they have proof of insurance and that you're double-checking to make sure that you're covered. You know, if they don't have enough coverage, or even more so just covering, covering your, your end and your farm, to know that you have enough coverage for an operation in case they hit an electrical line or hit a gas line or there's a vehicle rollover or something like that, making sure that you're protected in that situation.

Mark

Santas: Yes, great. Well, and you know, one of the things on having a subcontractor, um, is not only getting proof of insurance but possibly even having a subcontractor agreement that has a hold harmless in there as well, as well as a waiver of subrogation. Because remember, if you've got someone working on your equipment and that employee fell, now again, we're not dealing with a handshake agreement. We're dealing with two insurance companies. And so it's good to have— if someone's on your property and you're paying them for a service, it's not your favor to have your insurance company picking up your subcontractor's exposures. So if they were supposed to provide a safe work environment for their employees, you shouldn't— it wouldn't be fair if they were able— if those employees were able to sue you because they got hurt on your property.

So not only getting proof of insurance, but also getting a contract with a waiver of subrogation and a hold harmless agreement and an indemnification clause.

Shay

Foulk: That's a great point. Yeah. Okay, well yeah, I think we've covered most of the topics that I wanted to cover here, what you and I had discussed offline. Is there anything else that's on your mind that you think is relevant that we should be making our listeners and the farmers out there aware, especially this time of year? Is there anything else you can think of there, Mark?

Mark

Santas: I'll touch on this really quickly. One of the questions that we're ask a lot right now is hemp. In the Midwest, you know, we've got quite a few states that have legalized hemp, and this is pretty sticky from carrier to carrier. So I know a lot of farmers might be only peeling off 1, 2, or 5 acres, but be very careful. Your policy might not be providing the right coverages for that.

Shay

Foulk: That is a huge change in the industry right now. And I think it's super important to be especially careful when it comes to that because it's just, uh, it's uncharted territory right now. And if they wanted to, if they wanted to learn more about that as far as coverage and, um, you know, want to talk with you more on specific things or learn more about your business, Mark, how, you know, how can they contact you? Who they— who should they be reaching out to and where can they go if they have more questions?

Mark

Santas: Um, thank you. Um, our website is Alonji Insurance, all spelled out, so there's two I's in the middle, dot com. And my direct number is 608-751-3976.

Shay

Foulk: Awesome. Well, hey Mark, I really appreciate you taking the time today. I got a lot of value out of this. I think the listeners will as well. And maybe we can be talking down the road, either later on the winter or come spring, on some new things that we should be considering considering if that works for you.

Mark

Santas: Yes, sir.

Shay

Foulk: Thank you. Great. Thanks for joining us, Mark, and thank you everyone for listening to the Ag View Pitch, and we will catch you next time.

Narrator: Thanks again for listening, everyone. If you would like to hear more content from Ag View Solutions, listen to our other podcasts such as Dad's Wisdom or our current Harvest Series. Ag View Solutions works as an integral part of operations like yours, side by side for farm profit management, business collaboration and structuring, facilitating industry-leading peer groups, and coaching and consulting tailored to your farm's unique needs. We know that no two farms are the same, and we are here to help make your farm be the best it can be. You can learn more at agviewsolutions.com, email us at agviewpitch@gmail.com, or call Chris Barron at 319- 533-5703. We really look forward to talking with you.