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Monday, 6 August, 2001, 10:48 GMT 11:48 UK
Why are farmers not insured?
The government is compelled to pay insurance because of legislation
Farmers can only get insurance for 'consequential loss'
By BBC News Online's personal finance reporter Sarah Toyne

An estimated 2.3bn of taxpayer's money has been spent on the foot-and-mouth crisis.

It has emerged that 37 farmers are to receive compensation payouts of more than 1m.


People did not expect it to happen again after thirty years. They had reduced their insurance cover because of the farm income crisis - and they thought it wouldn't happen again

Sylvia Newton
NFU Mutual

So why is the government paying the bill, and why aren't farmers insured against the disease?

The answer is simple. There is basically no need for farmers to take out insurance.

This is because the government says that it is required, under the 1981 Animal Health Act, to compensate farmers for losing their animals as a result of disease control measures.

In practice, this means that if the government orders animals to be destroyed, it must then compensate farmers for the cost of replacing them.

The government is now proposing talks with the insurance industry to explore the creation of a central fund met by insurers and the government to mitigate its costs.

Small minority

Some farmers, however, do have limited insurance against foot-and-mouth.

This insurance covers any "consequential loss" incurred by farmers as a result of losing business. In addition, they will get government compensation for replacing their livestock.

The extent of cover will depend on a farmer's insurance policy. A typical policy will allow them to claim up to 25% of their stock's value while they wait for government compensation.

About 10% of farmers have this kind of insurance, according to NFU Mutual, the largest agricultural insurer.

The government is facing criticism for its handling of the crisis
Millions of animals have been culled

As Sylvia Newton of NFU Mutual says: "The government pay compensation for loss of herd, farmers take out consequential loss insurance for loss of business."

NFU Mutual's "business combined policy" will include a range of options for cover of product liability, employers liability, farm buildings insurance and a number of diseases including foot and mouth and tuberculosis.

The policy also covers environmental damage from storms, fire and theft.

It will cost a typical livestock farmer a couple of hundred pounds for the 'optional' element of cover for foot and mouth.

But NFU Mutual says that the number of people taking out the insurance has declined in recent years.

"People did not expect it to happen again after thirty years. They had reduced their insurance cover because of the farm income crisis - and they thought it wouldn't happen again," says Ms Newton



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05 Aug 01 | Scotland
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