By Lebogang Mashala
Due to increasing financial pressures, South African farmers may need to adopt innovative strategies, such as entering into contract farming arrangements, leasing portions of their land to third parties, or transitioning to higher-value crops and investing in infrastructure to maintain profitability.
However, Jan-Hendrik Botha, Head of Underwriting at Western National Insurance, cautioned that these changes may introduce new risks that are not covered by existing insurance policies. He emphasised the importance of full disclosure regarding any changes to farming operations.
When an insurance policy is initially underwritten, it is based on specific farming activities, such as cattle farming, crop production or fruit farming. “Changes to operations, such as leasing farm space to outside contractors, installing solar energy systems or engaging in third-party processing, can alter the risk profile. If these changes are not disclosed to the insurer, the policy may become invalid and claims could be denied,” Botha explained.
He noted there has been a worrying increase in non-disclosure in the agricultural sector, particularly concerning these types of operational changes. For instance, a farmer who enters into a joint venture with a contractor for crop spraying or storage may not realise that this increases both liability and fire exposure. Their policy, which is tailored to traditional farming risks, may not cover claims resulting from third-party negligence or equipment damage caused by unauthorised use. According to Botha, failing to disclose these activities leaves the business vulnerable.
The consequences of non-disclosure can be severe, potentially resulting in the policy being voided at the claims stage if the loss is linked to an undisclosed risk. Full and ongoing disclosure allows the insurer to make appropriate adjustments to coverage and pricing and provides opportunities to explore additional risk mitigation solutions, such as reinsurance or tailored endorsements, to protect both the farmer and the insurer’s exposure.
Frequent risk assessments
Botha highlighted that as farming businesses evolve, their risk categories may shift from medium to high-risk, necessitating more frequent risk assessments. Agricultural businesses typically undergo an initial risk survey, with annual reviews thereafter. However, when introducing high-value assets, such as processing plants, advanced irrigation systems or expanding storage capacity, the risk profile shifts significantly, and insurers may need to reassess more frequently.
He pointed out that another common area of non-disclosure involves infrastructure investments, such as installing solar panels or building cold storage facilities, as well as changes in farming activities, like transitioning from grain to high-value crops such as berries or nuts. “Farmers might not realise how these upgrades or shifts affect their insurance. If not reported, the policy may no longer reflect the business’s actual needs,” added Botha.
“If there is a history of non-disclosure, it may lead to increased premiums or even result in the business being denied coverage altogether. Insurers view non-disclosure as a sign that risk has been misrepresented, making it harder to maintain favourable terms,” he cautioned.
To help farmers navigate these evolving risks, Botha encouraged regular and transparent communication with brokers. “A broker’s role is to ensure that policyholders understand the full extent of their coverage and that any operational changes are disclosed promptly. This is especially important in agriculture, where operations can shift rapidly due to market demands or climate challenges. Working closely with a reputable broker is essential for maintaining adequate coverage.”
As the agricultural sector continues to modernise and adapt, full disclosure remains critical in protecting farming enterprises. “We urge all farmers to review their policies regularly, especially when changes occur in operations, assets, or third-party agreements. Keeping insurers informed is the best way to avoid unpleasant surprises at the claims stage,” concluded Botha.
