IS MEDICAL INSURANCE POSSIBLE FOR EMPLOYEES OF AGRICULTURAL COMPANIES IN THE REGIONS?
| Medical insurance
Medical insurance can be provided to employees in the regions, however it requires contractual relations between insurance companies and healthcare providers. If no contracts are in place they can be initiated on request, provided a critical mass of employees is to be insured. In the absence of associated healthcare providers, one can use life insurance. Life insurance with coverage of disability, death and serious illness Life insurance with coverage of disability, death and serious illness is a good alternative to medical insurance. It can also be a complement. Oftentimes the company helps financially an employee or their family members in case of injuries, serious illnesses, disability or death. Life insurance pays a sum of money to the affected person. The use of this type of insurance eliminates the company's subjectivity and establishes equal conditions for all employees. Medical insurance can be provided to employees in the regions, however it requires contractual relations between insurance companies and healthcare providers. If no contracts are in place they can be initiated on request, provided a critical mass of employees is to be insured. In the absence of associated healthcare providers, one can use life insurance. Life insurance with coverage of disability, death and serious illness Life insurance with coverage of disability, death and serious illness is a good alternative to medical insurance. It can also be a complement. Oftentimes the company helps financially an employee or their family members in case of injuries, serious illnesses, disability or death. Life insurance pays a sum of money to the affected person. The use of this type of insurance eliminates the company's subjectivity and establishes equal conditions for all employees. |
How much does crop insurance cost?
By traditional crop yield insurance we mean insurance of crops where losses are assessed by a loss adjuster in the fields (as opposed to index insurance which pays out based on data without any field survey).
In traditional insurance, crops are taken for insurance in spring time after the renewal of vegetation (for winter crops) or after sprouting (for spring crops).
The value of the harvest is insured, based on 2 parameters:
1. The expected level of yield (t/ha)
2. The value of the crop per ton (UAH/t)
Yield (t/ha) * Value (UAH/t) = Sum Insured (UAH).
The insurance rate is a percentage of the sum insured and defines the cost of insurance.
The insurance rate depends on the following parameters:
- Type of culture
- Location (district / oblast)
- Insured risks (only hail and fire or all risks, including drought)
- Deductible level (% of the sum insured)
- Type of deductible (per field, per crop)
Depending on these parameters, the insurance rate usually ranges from 1 to 6% of the sum insured.
Example:
A 100-hectare wheat field is insured in the Chernihiv region.
The expected yield of the client, which was confirmed by an expert of the insurance company, is 5 t/ha .
Insured value: 5 000 UAH/t. The insured value per ton is chosen by the client. It is used to adjust the sum insured. An approximate real price per ton is usually used.
The overall sum insured is: 5 000 UAH * 5 t/ha = 25 000 UAH/ha or 2 500 000 UAH/field.
For example, a field is in Chernihiv region and the client wants to insure the yield against hail and fire.
The client chooses a 10% deductible per field. The tariff amounts 2% or 500 UAH/ha or 50 000 UAH for a field of 100 hectares.
The deductible is 10% of the sum insured, that is: 2 500 000 UAH * 10% = 250 000 UAH.
The value of the field's future harvest is 2 500 0000 UAH. The client takes the risk of 250 000 UAH on his own. In case of hail or fire, all losses above 250 000 UAH are covered.
If the client chooses to have all risks covered (hail, fire, strong wind, heavy rain, drought), then the rate can be around 4% or 1 000 UAH/ha or 100 000 UAH/field.
What is a reinsurer?
A reinsurer is a company that takes over a part of the risks underwritten by an insurance company.
What parameters can be used to adjust the cost of agri insurance?
• level of deductible (10%, 20%, 30%)
• type of deductible (by field, by crop, by company)
• insurance limit
• insured risks
• insured yield
• insured price per ton
Index Insurance. Is it an alternative to traditional insurance?
Yes, index insurance can be an alternative to traditional crop insurance. Also, index insurance can complement traditional insurance (for instance using traditional insurance to cover hail risk and index insurance to cover drought risk).
There are many variants of index insurance: based on yield index, rainfall index, soil moisture index to name a few.
Index insurance is based on an algorithm that reflects the client's risk.
Advantages of index insurance:
• Flexibility. You can create an insurance product based on any algorithm.
• Transparency. The insurance product is based on official or certified data. The payout of the indemnity depends entirely on the achievement of the trigger (indicator set in the insurance contract).
• Efficiency. Index insurance does not require surveys of loss adjusters.
Is it possible to insure the revenue of an elevator?
Yes, elevator revenue can be insured using index insurance.
The level of crop production in sourcing regions where an elevator operates, directly affects the elevator's revenue. If grain production in the sourcing regions decreases, the elevator's capacity will be used only partially, which reduces the revenue of the elevator.
Example:
- Sourcing regions: 12 districts within a radius of 150 km from the elevator.
- Crop: corn
- 5-year average yield in sourcing regions: 5 t/ha
- Elevator capacity: 50,000 T.
- Service revenue: 500 UAH/t per season
- Overall season revenue: 50.000 T * 500 UAH/t = 25.000.000 UAH
Example:
The sourcing regions have to produce at 5-year average production yield to allow the elevator to operate at full capacity. A decrease in yield will generate an equivalent decrease in elevator load. For example a20% decrease of yield in the sourcing regions of the elevator will lead to a 20% in elevator load.
The elevator operator decides to insure the revenue with 10% deductible. It means that if the revenue decreases by more than 10% he will receive an indemnity from the insurance. A 10% decrease in revenue happens when the yield in the sourcing regions decreases by 10% (in this case decreases to 4.5 t/ha).
- Sum insured = elevator revenue = 25.000.000 UAH
- Deductible: 10% (that is 2.500.000 UAH)
- Insurance rate: 3%
- Insurance premium: 750.000 UAH
Due to drought, the average harvest in 12 supplier districts decreases by 30%, to 3.5 t / ha.
The elevator load decreases by 30% to 35.000 t and the revenue decreases to 35.000 t * 500 UAH/t = 17.500.000 UAH
Loss = 7.500.000 UAH
Insurance indemnity paid out the the insured = 7.500.000 UAH loss - 2.500.000 UAH deductible = 5.000.000 UAH
Mandatory insurance for DPZKU forward contracts – How we can help
When concluding a forward contract with DPZKU (State Food and Grain Corporation of Ukraine) the farmer must insure its crops through standard insurance policies defined by DPZKU.
Although the wording of the policies is identical for all insurance companies, the farmer can choose to insure with any of the accredited companies.
Insurance rates are also standard among insurance companies. This year, the insurance conditions are as follows:
Barley and wheat:
- Deductible: 30% of the sum insured per crop (for hail and fire risks - by field).
- Insured price per ton of crop: 3.600 UAH/t.
- Insurance rate: 3.2% of the sum insured.
Corn:
- Deductible: 30% of the sum insured per crop (for hail and fire risks - by field).
- Insured price per 1 ton of crop: 2.580 UAH/t.
- Insurance rate: 3.5% of the sum insured.
Note that the insured price for 1 ton is a set sum for all insured parties and independent of the purchase price set in the forward contract.
Considering that insurance conditions are standard, what is the added value of working with us for DPZKU insurance programs?
We provide the following services at no additional cost (you pay the standard DPZKU insurance rate, our services are included):
- Selection of the insurance company among the accredited ones. Terms and conditions are identical between companies but quality of service is not. It is important to make a good choice as the speed of settlement in case of loss varies greatly between insurance companies. Whatever the insurance company, it also helps to use a broker to speed up the settlement process.
- Control of the field survey process (at field acceptance and in case of loss).
- Administrative support at contract signature and claims handling.
Although insurance is a must to receive financing from DPZKU, crop insurance must be approached responsibly, since upon occurrence of a loss, the agricultural producer is the final beneficiary of the insurance indemnity.
When to insure your crops for the spring-summer period
Crop yield insurance covers your crops from the renewal of vegetation in spring till the harvest.
Depending on the type of crop and location, insurance contracts have aperiod of cover running from April-June to July-November. See graph below.
INSURANCE CYCLE
With traditional insurance, before the contract is concluded, the fields should be surveyed and accepted in insurance by the underwriter of the insurance company.
Add to this the quoting of the risk, contract discussion and insurance declaration, and it means that ideally you should start inquiring about insurance in March or April not to be in a rush.