Coming up on Spray Season!

Given that we’re about to hit full stride on spray season in the northern half of the US, I thought it best to give a quick reminder on how agriculture premiums are handled. To a certain degree, ag premiums follow different rules than all other lines of business. The premiums are often the highest rated of any line and they follow a unique cancellation method referred to as the “short rate scale”.

The reason for the higher premium is due in large part to two things:

First, the nature of the flight patterns – low-level flight is much riskier than most other types of flying. Things like power lines, treetops, lack of altitude to recover in an emergency, etc. are all in play. Second, chemical-related claims can be very severe. Often several hundred to several thousand acres can be treated with the wrong chemical before any adverse effect is known. Because of these factors, insurance carriers must charge an adequate premium for the risk they are taking.

A third element that enters into the equation is seasonality, which is why premiums are canceled on a short-rate basis versus a pro-rata basis. Short rate cancellations return less premium than pro-rata cancellations. Think of it as a sliding scale based on the number of days you need the chemical coverage, with a certain percentage returned after 30 days, 60 days, and so on. If the returns were pro-rata, the carrier would never make enough money to pay claims because the majority of operators would only be paying for 6-8 weeks’ worth of coverage (spray season in the northern United States).

There are some positive factors to consider as well. Operators can reduce their premiums by sending their pilots to certified safety programs like PAASS (Professional Aerial Applicators Support System) and Operation Safe. Also, keep in mind that there are several coverage options when it comes to chemical liability. You must relay a detailed summary of all spraying activity before flying so that you know the operation is covered.