The keys to getting the most out of the agricultural insurance

Although these tools represent a good alternative to mitigate the damage of a climatic eventuality like a frost or drought, they have a series of conditions that regulate their use. Know them below.


The last frosts that affected the central part of the country left a series of teachings in the sector. One of them is, without a doubt, the importance of farmers having agricultural insurance.

Farmers ' insurance and the best ways to get your performance

"They are a measure of great help to farmers because, taking into account the climatic irregularity in which we live, drastically reduce the most relevant risks that can affect a crop," says Manuel José Vial, lawyer of Araya & Cía. and expert In Insurance law.

"People must know that there are insurances and that they have to be exploited, because they allow to transfer the risks. So the call is for farmers to make sure, "complements Ricardo Prado, executive director of the Agricultural Insurance Committee (COMSA).

And it seems that Chilean producers are becoming aware of this or, in the case of the smallest, they are being pushed to do so to be able to access the benefits of INDAP. The concrete is that subscriptions are expected to exceed 21000 policies in the different insurances that exist in the country — almost 75% of them with Indap — covering about one hundred thousand hectares of annual crops (cereals, legumes and vegetables) and fruit trees (Grapes, apple, olives, blueberries and raspberries).

The best councils for agricultural insurance

The problem is that in the country the agricultural insurance has been implemented slowly, so that not all types of products can access them. On the other hand, independent of the product you want to ensure, it is important to be clear what things in that crop will be effectively protected and which are not, or what to pay special attention to.

So the experts insist that it is essential that before hiring a policy, the producer knows in depth the benefits, but also the clauses that have these tools.

Six keys to hiring insurance

Six keys to hiring insurance

1) Crops and insurable areas

The idea of agricultural insurance is to mitigate the damage caused by unexpected agroclimatic events such as droughts (in rainfed areas), excessive rains or extemporaneous, winds, hails, snow and frosts. The conditions of the policy to which the producer may opt will depend on the crop and the geographical area in which it is located.

Annual crop insurance, for example, includes products such as cereals; Vegetables Legumes Industrial crops, forage; Greenhouse vegetables; and cereal and potato seeders. The lands must, meanwhile, be located in certain areas of the region of Arica and Parinacota (Valles de Azapa, Lluta and Chaca); Of the region of Tarapacá (Camiña, Huara, Colchane, Pica and Pozo Almonte); and the Atacama region (valleys of Vallenar and Copiapó). These are added to all the agricultural communities located between the regions of Coquimbo and Los Lagos.

In the case of fruit trees, insurances include species such as Table grapes (III to VI region), UVA Vinifera (iv to VII region), Pisquera Grape (III and IV region), apple trees (V to IX region), olive trees (III to VII region), blueberries (iv to X region) and raspberries (iv to X region).

Manuel José Vial explains that the ideal candidate to take insurance, in the case of fruit trees, is the producer of grapes, apples, blueberries, olives or raspberries that has its property in an area of high climatic risk. "However, it should be kept in mind that the value of the premium will depend on the geographical risk zone where the site is located, so that a producer of a complex area from the climatic point of view will have to pay a higher premium," he adds.

2) How to determine the amount to be secured

The amount to be insured, i.e. the maximum value that the insurance company is obliged to indemnify, will depend on the type of crop (annual or fruit).

To determine this, in the case of annual crops, the first step will be to establish three key aspects: The expected yield, the coverage and the price of the product.

The expected yield corresponds to what the farmer believes he will get in the harvest, and is determined from historical data, seed quality, soil conditions and crop management. Delivering data as tight to reality is vital, because if the producer delivers false information about the yields, the risk is that, in the event of a claim, the indemnity will not be paid by the insurer.

The coverage, meanwhile, represents the part of the expected production covered by the insurance (insured performance). Although the general coverage is 2/3, in the case of some crops such as cereals and industrial crops it can reach 70% or 75%.

The price of the product, which is expressed in UF, corresponds to the value that is estimated to have the product at the time of harvest. This price is fixed on the basis of historical prices of the last seasons or based on estimates — discounting the costs of harvest and transport — carried out by the main players of the sector, at the beginning of each season.

Once these aspects are determined, the next step will be to multiply the surface assured by the expected performance by the coverage and the price. The result will correspond to the amount insured.

In the case of fruit trees the matter is more complex, since the amount insured will be determined from the sum of the insured productions of each variety and caliber, as agreed. This, in turn, will multiply by the prices of each variety and calibers, as appropriate.

In vines and apple trees, for example, the expected yield will correspond to the harvest estimates made by the producer based on the particular conditions of his property. The amount that the insurance will cover shall be calculated taking into account the production insured by caliber and the price of each caliber.

Amount Insured =? (Sum of the production insured by caliber x the price of each caliber).

In olives, blueberries and raspberries, an amount insured per hectare shall be established by virtue of variety and yield. The formula for calculating it is as follows:

Insured amount = Amount insured per hectare X secured surface.

3) The time indicated

There are certain periods, which depend on the crop, to contract the insurance. In the case of the annuals, for example, the policies must be contracted before sowing or transplantation in order to protect the crop during all its development.

For fruit trees, instead, it is advisable to contract the policies before the beginning of the period of risk, which is determined by the species. In vines, for example, the period of risk extends from sprouting to harvest; In apple trees from flowering to harvest; In Olivos from the first of March until the end of May or mid-June; In blueberries from the sprouting of the floral buds to the harvest; and raspberries from sprouting to harvest.

In both cases, the insurance should govern until the end of the harvest (date stipulated in the policy). If for any circumstance this is delayed, an extension of the insurance company must be applied for.

4) How to calculate the premium and the subsidy

The net premium corresponds to the cost of the insurance for the producer. To know its value you must follow the following formula:

NET Premium = Insured amount x The risk rate + 0.6 UF.

The risk rate will depend on the crop and its geographical location. Thus, a farmer who wants to ensure a highly frost-sensitive fruit in a high-exposure place will have to pay a premium greater than one in a lower-risk area.

It is important to note that the state, in all cases, delivers a subsidy corresponding to 50% of the net premium, plus 1.5 UF per policy. In this way, the farmer should only pay the equivalent of the net premium minus the subsidy.

"There is a ceiling of 80 UF per year for Ruth. That is to say, $1.8 million in the case of a farmer who proves his condition. What subsidizes the state is 50% of the Premium Plus 1.5 UF per policy. When the premium is low, as is the case for policies contracted by small farmers, the subsidy can finance over 90% of the insurance cost, "Prado explains.

In the case of INDAP users, the institution additionally bonuses up to 95% of the remaining non-subsidized by COMSA. In other words, the farmer will only pay approximately 2.5% of the premium (+ VAT).

To be more clear on this subject, producers can access the simulators that COMSA owns on its website:

Http://www.seguroagricola.com/index.php?option=com_content&view=article&id=9&Itemid=9

5) The keys to the settlement

The settlement takes place once the climate event that covers the policy occurs (check the box: Step-by-step settlement).

In the case of annual crops, depending on the occurrence of the claim and its magnitude, the losses caused by the climatic event can be classified in early total losses, late total losses and partial losses. In the latter case, production should continue until harvesting. The compensation will be when the production obtained — the result of the climatic event — is less than the insured production. In this case the value of the same will be the difference between the insured and the obtained production, valued at the price established in the policy.

Damages to compensation correspond to the direct costs of production until the date of the accident, with a limit on the amount insured indicated in the policy.

"This insurance is for direct costs such as seed and not for freight or taxes, which are indirect. It does not cover utility or profit. If a frost falls and everything freezes, the damage should be seen. The liquidator must make the report, notify the farmer and the insurance company to make the payment. In these last frosts we have made sure that the insurance companies pay in three weeks, which is especially good for some producers of annual crops that were able to re-sow, ' explains Prado.

In vines and apple trees there are three settlement alternatives:

-in significant losses prior to the curd, the compensation is calculated based on the operational costs proportional to the damaged surface incurred at the date of the accident, with a limit of 60% of the insured amount.

-In total losses after the set-up, the indemnity is calculated from the insured amount of the damaged liquidation unit.

-in the case of partial losses, compensation is calculated from the difference between the insured amount of the liquidation unit established in the policy and the production obtained from the harvest of that same unit, distributed and valued by caliber, with the Same criteria as indicated in the policy.

In olives, blueberries and raspberries the liquidation is carried out according to the percentage of damage caused by the covered risk, in one or more events. This percentage of damage, minus a 10% or 20% deductible, is applied to the insured amount indicated in the policy. This determines the compensation when applicable.

6) How to hire To hire these insurances is not required to apply. In fact, the process can be carried out directly in various financial institutions, INDAP and companies enabled. "Insurance is usually linked to debts. For this reason the insurance is taken in the bank, the policy is signed and this one is associated with the insurer, since it is endorsed. When there is a claim, the beneficiary ceases to be the farmer and he becomes the creditor, "Prado says. Now, if it is a small producer who decides to use Indap's help, and requests credits for amounts equal to or greater than UF, that credit will be associated with the hiring of insurance, provided there is coverage in the area for cultivation. "Farmers who do not apply for credit may voluntarily opt out of the agricultural insurance subscription. They must authorize INDAP to include in the credit, the unsubsidized amount of the net premium of the insurance, plus the VAT corresponding to the total of the premium. In addition, the technical background or parameters necessary to prepare the proposals must be given. The notices associated with the policy must also be made through the established channels and have an identity card, request for financing, proposal, mandate and policy ", indicate from Indap.