Chris Black says there is a certain harmony between how farmers and FMG view their businesses.
Chris Black finishes his role as Farmers Mutual Group chief executive next month after 13 years with the organisation. Colin Williscroft reports.
Risk will always be part of life for those who work the land, but farmers and growers are increasingly more conscious of it and plan accordingly, Chris Black says.
He says farmers and growers generally take a long-term view of their businesses, anticipating occasional ups and downs.
FMG does the same, so there is a type of harmony between the two.
“In terms of attitude, farmers have always needed to take risks to achieve goals, that’s part of being a farmer,” Black said.
He says the essence of the FMG is all about achievement, so it understands and respects the fact that farmers want to and need to take risks.
“The question for us is how can we help in that regard?
“All insurance does is really transfer the risk from the farmer and grower to FMG.”
He says behind that is helping clients better understand that, to be aware of the risks they are facing and be more conscious of them, along with the options around how to manage them.
Insurance is one option to transfer the risk, but there are other options around mitigating, avoiding, eliminating or even accepting the risk.
“That’s the thing with the mutual, we provide impartial advice to help farmers and growers to decide what’s best for them,” he said.
“Insurance is just one option but I think people have become more mindful of the risks, (so) there’s better planning.”
Black says one of the things he has seen change during his time at FMG is a greater awareness that risks can be managed in different ways.
“The other thing that’s changed is while there’s always been a focus on physical assets and operational risks, there’s been an increased focus on key personal risk in peoples’ businesses and farming operations,” he said.
He says there is also now a greater focus around business interruption, particularly after the earthquakes.
“There’s also an increasing awareness and understanding of the non-tangible risks, things like liability risk and cyber risk,” he said.
“They are trickier because they are more complex and you can’t see them.
“So, there is proportionally more focus on good planning, a link to good prevention and if we can help people avoid losses and interruptions in the first place, that’s good for everybody.”
One area of risk that is increasingly in the thoughts of farmers, growers is the impact of climate change and associated weather extremes, but Black says it’s something insurers have been thinking about for quite some time.
“One of the things with being an insurance company connected strongly to the rural sector is that we’ve always had an eye on the weather, just like farmers,” he said.
“So climate change and the impact of climate change is something that we have dealt with for a long time.
“We anticipate storms and events … that’s an inherent part of what being an insurance company is all about.
“We’re set up to anticipate those, to handle those from time to time on behalf of clients.
“Climate change is something that everyone is dealing more with, in terms of where they build and buy properties, and how they manage their operations.
“That’s just part and parcel of what we’ve been doing for a while.”
He says international reinsurance markets, effectively insurance for insurance companies, have been affected by climate change, but generally NZ as a country does receive good support from reinsurers, despite it being rated as second most risky in the world for natural peril risk after Bangladesh.
“We have good access to reinsurance and it’s still at a reasonable price,” he said.
“But with all this impact around the globe reinsurance rates and pricing is going up, there’s definitely upward pressure on that.
“What that does is in turn it puts pressure on insurance costs in NZ and one of the roles that we pride ourselves on is working hard on behalf of the rural sector to ensure that there is access to adequate insurance at an affordable price.”
He says a good example of that is the hail storms that hit parts of the country, including around Motueka, late last year.
“That was very tough but we had reinsurance support for that,” he said.
“An event like that does make reinsurers nervous, but we’ve worked really hard to make sure that we’ve got access insurance at an affordable price for our clients.”
During his time with FMG, Black has seen client numbers increase from 50,000 to more than 100,000, with a corresponding rise in market share from 35-52%, something he says is very heartening.
However, as a mutual, FMG operates under a different model than a listed company would.
Black says the organisation is focused on providing the rural sector with continued access to affordable insurance.
“While we need to make a profit, we’re not profit maximising, as an organisation like a listed company might be,” he said.
“We make a modest profit, we target that over time and we add it to reserves. It’s a closed system in that sense, there’s nothing going out of the system, no dividends paid to shareholders.”
“Our customers are the farmers and growers who own the business, so there’s no mismatch in terms of alignment of interest.
“With a stock listed company usually the owners are different from the customers, so you get a bit of tension there that you don’t get with a mutual.”
Black has spent a bit of time recently talking to incoming chief executive Adam Heath, to ensure there is a smooth transition.
“He’s very experienced in insurance, that’s both on the general side and the life side as well,” Black said of Heath.
“He’s got an affinity with the rural sector.
“I’ve spent quite a bit of time with him, he seems like a well-grounded person, will fit the values of the mutual model well and is keen to make a difference and take it to the next level with the team we’ve got.”
As for his own future, Black is looking forward to spending more time on projects at more of a community rather than executive level.
While he’s looking forward to some new challenges, there are some things he will miss.
“I’ll miss working alongside some great people, but when you come into a job you play your innings as well as you can, and we’ve done that well as a team, before handover to the next person coming in and hopefully they can do the same and take it to the next level,” he said.