How does a nursery, greenhouse or garden center owner budget for insurance and consequential uninsured loss? No longer is just looking at premium cost sufficient. It is now critical to understand the additional impact to the business of uninsured deductible dollars, lack of availability, and disputes over the extent of damage to property. While this cannot be a precise planning process, it does need consideration.
Unfortunately, the hail continues to fall. As a result, availability, premium and deductible increases have become the norm. Most insurance carriers have filed for property and auto rate increases, and have expanded the use of property wind/hail percentage deductibles. Some carriers have nonrenewed those with significant losses, and others refuse to insure higher risk exposures. It has become a serious challenge for carriers to continue to provide property insurance in extreme storm-prone states. In 2018, Texas had 508 hail events, Kansas 493, and Colorado 332. Colorado’s Front Range receives the highest frequency of large hail in North America. In the last 10 years, Colorado hail damage has exceeded $3 billion in insured damage.
“It has become a serious challenge for carriers to continue to provide property insurance in extreme storm-prone states. In 2018, Texas had 508 hail events, Kansas 493, and Colorado 332. Colorado’s Front Range receives the highest frequency of large hail in North America. In the last 10 years, Colorado hail damage has exceeded $3 billion in insured damage.”
For budgeting purposes, plan on property and auto premium increases. Perhaps more importantly, make sure you understand the property wind/hail deductible, which now commonly ranges between 1% and 5%. This deductible is usually per building based on the property limit of that building, so can result in major uninsured loss, especially when multiple buildings are involved. Workers’ compensation rates should remain level or have a modest reduction. Equipment rates should stay level (inventory your equipment for adequate limits and protection). Liability and umbrella costs should also stay level.
Because of the current insurance environment, we are evaluating the introduction of a CNGA parametric insurance program against hail for nurseries, greenhouses and garden centers. Parametric insurance pays if the event happens. If hail of a specified size falls on the property, the policy pays the limit of insurance purchased. Traditional insurance pays for the damaged property as determined by a claim adjustment process.
For example, with parametric insurance, one could insure against 1.25-inch hail for a limit of $500,000. A “weather station” is installed on the property that provides the policyholder with information on wind, rain, hail, humidity, temperature, and evaporation. This includes the size of hail stones. Should a storm produce 1.25-inch hail, the policyholder receives a $500,000 settlement. There is no claims adjuster and no property damage evaluation. The claim is paid within days of the verified event. This approach may be particularly pertinent to nurseries with a large outdoor stock inventory. Parametric insurance is an option that deserves consideration. It is not intended to replace traditional insurance.
Remember, never shoot the messenger. Considering insurance and the consequences of not having enough is difficult. It’s super important that you have an insurance relationship with a professional advisor that understands your business and your insurance needs.
