Market resumes expansion and has already grown 40% in first half
08/31/2022
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Aline Milani — Foto: Divulgação
The good performance of the Brazilian agribusiness, supported by record harvests and high international prices of commodities such as soy and corn, keeps producers capitalized and continues to stimulate the upgrade of agricultural machines and equipment, with expressive reflexes on the insurance market.
According to the federation of automotive vehicles distribution (Fenabrave), the sales in the segment — fostered mainly with funds from Moderfrota, the main credit line for investments in the Crop Plan — increased 32.9% in the first half of the year compared to the same period in 2021, to 31,600 units. It was the best result for the period since 2013. And the trend is upward.
According to Brazil’s statistic agency IBGE, the production of agricultural capital goods increased 14% in June over the same month in 2021. In the 12 months through June, the high was 11.5%. Last year’s figures seen poised to be exceeded. Last year, according to Abimaq, sales totaled 58,000 units, or R$ 38.3 billion.
Simultaneously, the insurance market for the equipment is also growing because they are expensive assets — harvesters, for example, cost millions. According to the Superintendence of Private Insurance (Susep), premiums in the area reached R$1.6 billion from January to June, with a nominal increase of 42.38%. After adjusting to inflation, the increase was 27.98%.
Although it is a significant amount, the insurance of improvements or equity (when the equipment is not used as collateral for a loan) and rural pledge (when the good is given as collateral), represent a fraction of vehicle insurance turnovers, whose premiums exceeded R$22 billion in the period.
With an eye on this gap, traditional companies and cooperatives have been trying to improve insurance for agricultural machinery in Brazil. Bradesco Seguros is one of them. The company wants to triple its penetration in the segment by the end of 2023, and to do so it is designing partnerships with cooperatives and startups, modernizing policies, and investing in training for its brokers.
Bradesco Seguros closed the first half of the year with more than 20,000 insured agricultural machines and equipment, 34% more than in the same period of 2021. Premiums rose 57%, to R$110 million. Coinciding with the agribusiness map, the Central-West and South regions account for about 70% of Bradesco’s sales in the segment. For 2022, the goal is to reach R$200 million in premiums, a 31% increase over 2021.
Saint Clair Pereira Lima, head of Bradesco Seguros, the growth figures show that the segment has never been so good, although it is still little understood by the farmers. “Most machinery insurance is taken out when the asset is financed. We want to show that insurance is the continuity of the business. If a harvester breaks down in a crucial period, the farm’s productivity is compromised”, he said.
According to the executive, the price does not impede for the producer to take out insurance. The average rate charged is around 1.2% of the value of the asset, compared to 4% in the case of vehicle insurance.
The numbers of Banco do Brasil Seguros, an institution historically closer to farmers, show that spontaneous insurance is incipient. The company issued R$31 million in premiums in the first half of the year, with 12,000 policies — up 60% year-over-year. Insurance linked to bank loans totaled R$660 million, with 480,000 policies and an increase of 30%.
“The market has changed, but the perception of risk for farmers is different. They see the need for agricultural insurance because they feel the effects of the drought, but the wear and tear of parts and the need for machinery maintenance is seen as an inherent risk,” said Aline Milani, BB’s rural insurance development manager.
She also observes that farmers, in general, are not used to insuring assets, unlike what happens in urban centers. “Large producers, instead of insuring, do fleet management. They take a harvester from one farm and sends it to another, as needed. This is common with cotton equipment, which is very expensive. Small and medium producers, on the other hand, sometimes have old machines, which are not serve by insurance companies,” she said.
Sávio Susin, Sicredi’s insurance head, points out that this is one of the major problems faced by the group, whose focus is on members of credit cooperatives. “It is not uncommon for machinery that is more than 10 years old to continue in use by members of the cooperatives, and these are outside the insurance market. And for medium-sized producers, the price is an obstacle,” he said.
For Mr. Susin, although the rate charged is not so high, the absolute value is, because agricultural equipment costs from tens of thousands of reais to a few million. “With more technology on board every day, there are machines that cost more than R$3 million or R$4 million. That is, 1% of these values is a lot of money for smaller producers.”
Sicredi serves about 26,000 producers and financed R$8.2 billion in machinery in 2021/22, in more than 38,500 operations. Of this total, only 31% included direct insurance. In the others, the producers sought other agents.
The equipment claims are much more related to damage or accidents, such as overturning, than to theft. And, in the market’s perception, thefts need to gain more weight in this bill. “We have been insisting that the producer takes out agricultural insurance and equipment insurance so as not to lose assets, but it hasn’t been that simple. We always think that nothing will happen to us, right?” said Alcir José Goldoni, CEO of Credicoamo, which operates as a rural credit cooperative of Coamo, the largest agricultural cooperative in the country.
“And it’s not enough to insure the machines. You have to protect the shed where they are stored, the power equipment, everything. It is asset preservation. If a cyclone comes, everything is lost,” he said. Credicoamo has more than 10,000 machine policies, the majority of products that are still being paid for.
*By Fernanda Pressinott — São Paulo
Source: Valor International