Risky business: Poor performance by financial markets has led to reduced operating profit

The industry provides insurance to the agricultural sector and is itself a subsector of the general insurance industry in the United Kingdom. The industry struggled over the past five years as premium income growth was dampened by wide spread uncertainty in the economy following the result of the EU referendum. Additionally, significant damage was caused by natural disasters, particularly flooding, which raised the value of claim pay-outs. Poor performance by financial markets over the two years through 2016-17 and in 2018-19 resulted in reduced operating profit. Industry revenue is expected to decrease at a compound annual rate of 1.1% over the five years through 2019-20.In the current year industry revenue is expected to increase by 0.4% to reach just under £1.3 billion...read more.

Industry Statistics & Market Size
Revenue
£1.3bn
Annual Growth 15-20
-1.1%
Forecast Growth 20-25
Profit
Employment
3,922
Businesses
219

Industry Threats & Opportunities

  • Decreases in farming subsidies after leaving the European Union will likely dampen demand
  • Flooding in particular has been a growing problem in the United Kingdom
  • The level of subsidies that UK farmers will receive remains uncertain
  • Industry Report - Industry Products Chapter

    Farm combined insuranceFarm combined insurance policies tend to cover a broad range of items. Coverage is often tailored to customer needs and may include buildings, machinery, livestock, personal accident, illness, and house and contents insurance in one policy. Some policies also include hailstorm insurance for crops. The majority of insurance policies written by the Agricultural Insurance industry are in this form of combined farm insurance.In January 2014, Somerset County Council declared a major incident after approximately 20,000 acres of agricultural land was submerged in water for over a month. Similar scenes beset agricultural land across the United Kingdom, particularly in regions in the south of England. Jan...purchase to read more.

    Additional Insights for the Agricultural Insurance Industry

    IBISWorld identifies 250 Key Success Factors for a business.The most important for the Agricultural Insurance Industry are

  • Ability to effectively manage risk
  • Management of a high quality assets portfolio
  • Well developed internal processes
  • IBISWorld analysts also discuss how external factors such as Damage caused by natural disasters and Demand from dairy cattle raising in the Agricultural Insurance industry impact industry performance..

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    What's in this report

    What is the Agricultural Insurance Industry?

    Firms in this industry provide agricultural insurance, also known as farm or crop insurance. Agricultural insurance is purchased by agricultural producers to protect against either the loss of their crops due to natural disasters, such as hail, drought and floods, or the loss of revenue due to related farm-specific risks.

    Industry Products
  • Farm motor insurance
  • Livestock insurance
  • Farm combined insurance
  • Other liabilities
  • Industry Activities
  • Provision of natural disaster insurance
  • Provision of crop growing insurance
  • Provision of livestock insurance
  • Provision of machinery and equipment insurance
  • Other farm liability insurance
  • Table of Contents

    Industry Definition
    Main Activities
    Similar Industries
    Additional Resources
    Industry Statistics Snapshot
    Industry Structure
    Executive Summary
    Executive Summary
    Key External Drivers
  • Damage caused by natural disasters
  • Demand from dairy cattle raising
  • Downstream demand from agriculture
  • FTSE 100
  • year bond rate

  • Current Performance
  • Instability and investment income
  • Floods, storms and droughts
  • Risk assessment
  • Solvency II
  • Chart: Revenue Growth

  • Industry Outlook
  • Downstream demand
  • Cost-saving innovations
  • Product development
  • Operating environment
  • Table: Agricultural Insurance Industry Revenue Outlook

  • Industry Life Cycle
  • Life cycle reasons
  • Chart: Benchmarking - Agricultural Insurance Industry Lifecycle vs The Economy

  • Supply Chains
    Key Buying Industries
  • Cereals, Leguminous Crops & Oilseed Growing
  • Vegetable Growing
  • Dairy Cattle Raising
  • Sheep Farming

  • Key Selling Industries
  • Insurance Agents & Brokers

  • Products & Services
  • Farm combined insurance
  • Livestock insurance
  • Farm motor insurance
  • Other liabilities
  • Chart: Agricultural Insurance Industry Products and Services Segmentation

  • Demand Determinants
    Major Markets
  • Dairy farmers
  • Livestock farmers
  • Grain farmers
  • Fruit and vegetable farmers
  • Chart: Major Market Segmentation for the Agricultural Insurance Industry

  • International Trade
    Business Locations
    Chart: Business Locations by State
    Market Share Concentration
    Key Success Factors
    Cost Structure Benchmarks
    ProfitClaims expensesThe largest costs by far for industry operators are claims expenses. Claims are estimated to account for 61.5% of revenue in 2019-20, a figure included under ‘other’ in the chart. However, this expense varies from year to year depending on the number and severity of natural disasters and accidents that farmers may be involved in. The variability among industry participants can also be high, depending on the type of crop and geographical location of the assets they have insured. On a proportional basis, claims expenses generally account for 55% to 70% of industry revenue. WagesDue to the client-facing nature of roles in the industry, and the back-office administration responsibilities, industry participants have difficulty adjusting their workforce to income variability. As a result, wage expense may impede profit margins in years when investment income has been depressed by market conditions. Wages are forecast to account for 11.5% of industry revenue over 2019-20. Reinsurance expensesAnother significant cost for industry operators includes reinsurance expenses. Insurance companies mitigate their risks by reinsuring their portfolio of assets. This process is also known as ceding. While companies do not reinsure their entire portfolio, they insure a substantial amount so that they can remain operational if claims rise dramatically, as they do following natural disasters. Furthermore, reinsurance enables a company to improve its capital structure, enabling it to write more business. Reinsurance expenses are estimated to account for approximately 9% of revenue in 2019-20, a figure included under ‘other’ in the chart. Other
  • Chart: Cost Structure Benchmarking – Sector vs Agricultural Insurance

  • Basis of Competition
    Internal competitionExternal competition
    Barriers to Entry
  • Table: Barrier to Entry Checklist for the Agricultural Insurance Industry

  • Industry Globalization
    National Farmers Union Mutual Insurance Society Ltd,
  • Table: National Farmers Union Mutual Insurance Society Ltd - financial performance

  • Capital Intensity
  • Chart: Level of Capital Intensity for the Agricultural Insurance Industry
  • Chart: Tools of the Trade: Growth Strategies for Success

  • Technology & Systems
    Revenue Volatility
  • Chart: Volatility vs Industry Growth

  • Regulation & Policy
    Industry Assistance
    Table: Industry Data for the Agricultural Insurance Industry
    Includes:
  • Industry Revenue (2011-2025)
  • Industry Gross Product (2011-2025)
  • Establishments (2011-2025)
  • Businesses (2011-2025)
  • Employment (2011-2025)
  • Wages (2011-2025)
  • Wages (2011-2025)
  • Purchases (2011-2025)
  • Profit (2011-2025)
  • Depreciation (2011-2025)
  • Marketing (2011-2025)
  • Rent (2011-2025)
  • Utilities (2011-2025)
  • Other (2011-2025)

  • Table: Annual Percentage Change for Key Industry Data
    Table: Key Ratios for Industry Key Data
    Combined Ratio
  • A measure of underwriting performance, which equals the sum of the loss and expense ratios. A combined ratio above 100% indicates an underwriting loss.
  • Underinsurance
  • Refers to the state in which consumers are not adequately protected by insurance policies against risks.
  • Underwrite
  • The process that an insurer, investment house uses to assess the eligibility of a customer to receive their products.
  • What Our Customers Say

    Why buy this report?

    IBISWorld’s Agricultural Insurance market research report offers insightful industry analysis and research into the market at the national level. IBISWorld’s in-depth industry market research is presented in a logical and consistent format. The industry report contains key industry statistics, market size, industry trends, and growth and profit forecasts for a 5-year outlook period.

    IBISWorld industry market research reports enable you to:
    • Find out about key industry trends
    • Identify threats and opportunities
    • Inform your decisions for marketing, strategy and planning
    • Quickly build competitive intelligence
    This report on Agricultural Insurance:
    • Provides Market Size information to assist with planning and strategic decisions.
    • Includes the necessary information to perform SWOT, PEST and STEER analysis.
    • Helps you understand market dynamics to give you a deeper understanding industry competition and the supply chain.
    • Analyses key performance and operational metrics so that you can benchmark against your own business, that of your customers’ businesses, or your competitors’ businesses.
    The Agricultural Insurance market research report includes:
    • Historical data and analysis for the key drivers of this industry
    • A five-year forecast of the market and noted trends
    • Detailed research and segmentation for the main products and markets
    • An assessment of the competitive landscape and market shares for major companies
    • And of course, much more

    IBISWorld reports on thousands of industries around the world. Our clients rely on our information and data to stay up-to-date on industry trends across all industries. With this IBISWorld Industry Research Report on Agricultural Insurance, you can expect thoroughly researched, reliable and current information that will help you to make faster, better business decisions.

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