Corraling The Horse Market

With only 17 percent of the nation’s 6 million horses insured, the equine market is ripe for picking

In today’s steady economy, equine insurance could be one of the best markets you’ve never thought about tapping. Then again, if you don’t know the front end of a horse from the back, it could also be the toughest.

Equine coverage is relatively new in the U.S. market, with a stable history of roughly 30 years. But with only about 17 percent of the country’s 6 million horses insured, it’s a market with huge growth potential.

So what does it take for an agent with no previous livestock experience to begin writing equine coverage? It turns out there are more hurdles than a Pimlico steeplechase. But first and foremost, it takes winning the trust and respect of horse owners.

“Most of the time, if you don’t talk horse, they won’t do business with you,” said Melissa Saunders, livestock product line and agriculture department manager for American Reliable, a member of the Assurant Group. And even if you can gain the trust of the owners, convincing the companies you have what it takes to sell equine insurance without an established book of business can be nearly impossible.

Few of the large companies writing equine coverage in the U.S.—American Equine, American Reliable and Redland to name a few—will work with agents without a sustainable, existing book of equine business.

That’s where managing general agents can come in handy for a first-time or inexperienced equine agent.

“That’s the role we play,” said Evan Beauchamp, vice president of Equine Insurance Specialists, a managing general agency in Muncie, Indiana. “We’re in the wholesale business, so it’s our job to walk them [agents] through their first few accounts and help agents place business. Generally, the agents coming to us have two or three accounts and not a lot of expertise.”

As a result, MGAs like EIS are seeing tremendous growth. This year alone, EIS expects their book to grow ten-fold. “As long as the economy is good, people are going to pay a lot of money for horses and they’re going to insure them,” Beauchamp said. “But until you learn to write this coverage very efficiently, it’s going to drive you nuts.”

Horse-sense
Part of the difficulty of writing equine coverage stems from the multiple types of coverages available for the multiple types of horses and horse uses. It’s a case where just knowing the products may not be enough. Knowing the horse, the horse’s primary use and whether additional property coverage will be needed are just some of the questions that must be answered. And coverages vary from state to state.

There’s mortality, liability and property coverages that are different for pleasure horses, sport horses and race horses. There’s different property coverage for tracks, barns and stables as well as arenas, associations and clubs. Then there are the unique coverages for horse rentals, dude ranches and therapeutic riding. The coverages run the gamut, and while many of the coverages out there are similar in scope and price, not everyone services every market, and not everyone covers the same things.

In horse country, a lot of coverages are offered cafeteria-style in order to meet the specific and unique needs of each individual owner. For example, American Equine Insurance Group can provide mortality alone, or add coverages such as surgical, liability and loss of use. And one thing AEIG does that some companies have found unprofitable is to place a $3,000 emergency colic surgery rider on its mortality policies. For AEIG, it’s standard because so many horses fall prey to colic.

“It’s just the right thing to do,” said John Hart, program manager for AEIG’s property/casualty program for horses. “Owners are faced with a large expense and they may hesitate. We wanted to encourage people to take their horse to the vet for treatment.”

AEIG covers all kinds of horses except race horses. “We are the specialist in show horses and competitive horses,” Hart said. And horses are all that AEIG writes. “There are keys to whom you should do business with in this market. It’s real important that you’re doing business with a carrier that understands the business.”

Picking the right partner
Fit is also important. And that is why Beauchamp, who writes primarily pleasure and farm horses, does the majority of his business through AEIG. But for brokers like Brent Allen, vice president of The Equestrian Group in Arizona, standard companies like AEIG and American Reliable insure just a small part of his business.

“Our focus is more active recreational,” Allen said. “We’re probably one of the largest insurers in the U.S. of guided trail rides.” And that’s a market insurers such as AEIG and American Reliable just won’t touch. It’s a very volatile market, Allen admits, but one the company has managed to pull back the reins on, so to speak. Allen has made this book profitable by being “very dictatorial.”

“We provide our insureds with guidelines for operating their business, and if they don’t follow those guidelines, we won’t insure them,” Allen said. “We’ve proven we know how to underwrite it and we can make them money.”

Still, there are only five or six viable markets for the kinds of horse operations Allen insures. His carrier of choice often changes yearly, he said. Today, it is Genesis Indemnity, a subsidiary of the Berkshire Hathaway Group.

Horses, it turns out, are simply not the same as other livestock, and that’s why many insurance companies won’t write horses, or write property with horses on it. “People get on them and fall off,” Hart said. “Even the best riders fall off—and these are the riders we understand.”

Last year, AEIG did $20 million in business, a far cry from the $350,000 it wrote in 1988, the company’s first year in business. It put them comfortably in the top four or five carriers in the country. Likewise, American Reliable, writing on American Bankers paper, has established a hefty book of business in the U.S. and Canada. Melissa Saunders said the company has been writing equine since 1973 and is now the largest writer of equine coverages in North America.

“A lot of our agents specialize in a kind of breed or a specific region of the country,” she said. “The agents who do a lot of business with us, say our top 10 agents, do nothing but livestock.”

But more and more agents are looking into the niche. And the companies’ business will likely only grow over the next few years as agents seek to diversify their books.

“I think there’s a desperate search on the part of agents right now to find niche markets because the base of their business is eroding,” Allen said. “A lot of that has to do with direct writers.”

In the equine business, however, few companies, if any, offer true direct services, though the Markel Group, according to Allen, will do case-by-case brokerage that is, in effect, direct writing.

But the horse person’s desire to work with people they know and who know horses seemingly corrals the entry of direct writers into this niche. What agents will really need to watch if they are interested in writing equine to diversify their books is the market.

“It’s very cyclical—it goes with the economy,” Melissa Saunders with American Reliable said. “When the economy is down, people don’t buy horses and they don’t insure them.”

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