Published by Farmers Guide, September 2009

Specialist insurer covers one million hectares and counting

The management team at Farmers & Mercantile includes (l-r): Nigel Wellings, Alexandra Wellings and Tom Forster.

YOU don’t always need a new idea to create a successful company, sometimes just taking an existing business model and improving on it will pay dividends.
That’s certainly the case at Northamptonshire-based Farmers & Mercantile Insurance Brokers Limited, where managing director Nigel Wellings has built the firm into one of Britain’s largest independent agricultural insurance specialists.
Farmers & Mercantile has tripled in size in the past four years and, with the company’s policy holders currently farming almost one million hectares, the rate of growth shows no sign of slowing and the business is predicted to double in size between now and 2012.
From a Lincolnshire farming family, Mr Wellings studied at the Royal Agricultural College, Cirencester, before working in farm management, but it was seven years working as an agent with NFU Mutual that prompted him to set up his own business.
“I just didn’t believe that working with just one insurance company was providing the best deal,” he told Farmers Guide. “I felt that operating as an independent broker would allow me to provide a much better service to customers.”
But there was much more to Mr Wellings’ plan for going it alone. He knew that by specialising in agriculture and focussing on low-risk clients he could achieve considerable cost savings for customers that had previously been insured by a company that would insure any business and anyone.
“The business plan, quite simply, was to provide an independent farm insurance service to larger and more progressive farmers,” Mr Wellings said. “If you consider an average 500 acre arable unit, the risks to an insurer are fairly low.
“There’s a fire risk when the crops near harvest and a machinery risk for about six weeks when harvesting and cultivations are taking place, but for the rest of the year modern farms are a very good risk.
“We spent a lot of time explaining this to insurers and made the case that there was a vast difference between large arable farms and the smaller mixed units that tended to be the source of most agricultural claims.”
The pitch to the insurance companies paid off and in 1996 Mr Wellings and a small team of staff started operating from offices at Sywell. Operating as a broker, he had a choice of 40-50 insurance companies to recommend to clients, while his experience of agriculture and the levels of risk involved allowed him to negotiate the best premiums.
Mr Wellings admits that the first couple of years were a hard slog.
“To start with it wasn’t easy to persuade farmers to move away from an insurer that they had been with for many years, and in some cases generations,” he said, “but progress was steady and we started to build a good client base.
“Then, after about three years, we started to get farmers contacting us at the recommendation of their neighbours. Even today about one-third of the new business we take on comes from customer referrals, while at one stage last year it was running at 40% – it probably helps that we send a case of wine to every client who sends a new customer our way.”

Customer retention
It’s all very well winning new business, but in a service industry like insurance it’s keeping hold of customers that’s important. In this respect, Farmers & Mercantile has no problems, with 98-99% of policies being renewed year-on-year.
“We know that our customer service has to be top notch, so that’s always been a priority,” Mr Wellings said. “Whether we’re meeting clients on farm, or handling claims calls in the office, we make sure that our people know what they’re talking about and can handle anything that’s asked of them. Just as importantly, every customer has an out-of-hours contact number so that they can always get in touch with us.
“Every potential customer gets an on-farm visit before we take on the business, followed by an annual on-farm review, and we take pride that our brokers all have a solid grounding in agriculture. A few have come from an insurance background and we’ve trained them up on farming, but usually we go for staff that have a strong agricultural links and develop their knowledge of the insurance business.”
The farm visits are central to the Farmers & Mercantile business and are far from courtesy calls to have a cup of tea and to pick up a cheque.
“You can tell a lot about how a farm is run by having a good look round and our visits are an important part of the decision making process of whether we take on a new customer or not,” Mr Wellings said, “and the annual reviews are equally important.
“When we go back every 12 months it’s not just a case of ticking boxes and taking a note of new machines to add to the policy, we’re there to make recommendations based on our knowledge of what’s going on in the wider industry.
“For example, the effect that exchange rates have on machinery values can’t be underestimated. At one review last year, a client wanted to put a value of £85,000 on a four-year-old combine, but we advised him that £110,000 was a far more appropriate valuation.
“Unfortunately, the combine was destroyed by fire and was a total loss, but the insurer looked at the combine market and paid out £106,000 for it. That was at least £21,000 more that the customer would have got if he hadn’t listened to our advice.”

Room for growth
Farmers & Mercantile recently move to new offices at Sywell, not far from where it began. The old premises had become too small and the company needed room for further expansion.
The team in Northamptonshire now numbers 28 staff and growing, but the firm has 24 more staff at three satellite offices at Ludlow, Shropshire, Boroughbridge, North Yorkshire, and Ayr, in Scotland.
“Both the Ludlow and Boroughbridge offices were started from scratch,” Mr Wellings said. “There has been a lot of consolidation and mergers in the insurance industry, but we didn’t want to buy an existing broker that would detract from our agricultural specialism, so we have put new teams in place and relied on organic growth to build the business.”
The Scottish office, on the other hand, was an acquisition, but one that fitted perfectly with the existing business.
“We were lucky enough to be offered a business that, like ourselves, specialised in agricultural insurance and had more than 95% of its client base involved in day-to-day farming,” Mr Wellings said. “It really was a perfect fit and we were only too happy to take it on, especially as the previous owner was happy to stay on and help us run the office.”
Another strategy in building Farmers & Mercantile has been to get the business in front of farmers at agricultural shows and events, where there’s plenty of opportunity to meet new and existing clients.
The company has also developed its relationships with the major insurers and is proud of the fact that it now has underwriting authority with three of them.
“In essence, this means that we are able to write policies and set premiums on their behalf,” Mr Wellings said. “It’s not something they give away lightly, but they trust our experience in the industry to provide the appropriate cover at the right price.
“We have our own, in-house software that allows us to provide bespoke quotes and policies for our clients and we will try and provide cover for farms and most of the diversification enterprises they might run.
“In most cases we can cover everything – farmhouses and other farm dwellings, farm buildings, farm vehicles and machinery, inputs, crops that are growing and in-store, livestock, employer’s liability, public liability, and product liability – on just one policy, which keeps everything simple and straightforward. There’s nothing worse than if there’s a claim and two or three different insurers are arguing over liability.”
The firm’s software also allows the company to meet very specific requests.
“We met one farmer on a show stand that had just one question: would we take his business on the basis of a £10,000 excess,” Mr Wellings said. “We arranged to meet him on the farm and the enterprise was of such a size that he simply wasn’t interested in claiming for less than £10,000. We took away the details and were able to place his business with an insurer at an extremely advantageous price.”
And as farming rules and regulations change, other new types of insurance have to be added to the Farmers & Mercantile offering.
“Another area where we have been able to react is insuring contract farmers against breaches in cross-compliance rules,” Mr Wellings said. “Mistakes made by a whole-farm contractor with regards to field margins could cost a landowner dear with regards to the Single Payment Scheme, so we now provide insurance cover to make up any losses should problems arise.
“It’s a good example of how proactive we are in customising a policy for each and every farm.”