Covid-19 and the resulting restrictions on leisure, retail and other economic activity, have further highlighted the benefits of diversification within the agricultural sector. Having various income streams has been shown to have tangible advantages.
Diversification had already been embraced by many farms, be that through the opening of a farm shop, the creation of holiday lets, a camping site or a B&B business, or the use of land for telecommunications towers or solar farms. Others have utilised one of their own products, such as milk, to create their own food ranges.
According to the Department for Environment, Food and Rural Affairs (Defra), 65% of farms had already undertaken some form of diversification by 2019 and 48% of farmers were planning to set up or expand diversification enterprises. 
Many farms who diversified into leisure and hospitality have suffered the same fate as the rest of these sectors during the pandemic, with rental income having been way below projections for 2020 and with continuing restrictions in 2021. Plans to diversify further and add another egg in the basket are likely to have been discussed, particularly with the introduction of the new Agriculture Act 2020 , which seeks to foster innovation on farms and reward those serving the public need, in terms of healthy foods, flood alleviation concepts and environmental protection.
Interestingly, however, there is another driver behind farm diversification and it is the desire to provide family members with new opportunities that enable them to use their skills and be entrepreneurial.
Any farm diversification idea should be applauded but it should also be underpinned by a discussion with an insurance broker, whether it is a brand-new diversification or an expansion or change to what already takes place on the farm and within its buildings.
An existing insurer needs to be advised of any new plant or machinery, new members of staff, and any changes to operations that could alter the risk insured. An example of this could be a new home delivery service, established as a response to Covid-19.
Farms should keep a keen eye on their overall sum insured on their policy and ensure that they do not become underinsured. Adding new items, be those tractors, quad bikes or even robotic milking machines, without advising your insurer, or allowing your land to be used for a different purpose, could all alter the farm’s risk and take you beyond your sum insured limit.
Those planning a completely new diversification should perhaps find out what sort of insurance protection it would require, before committing to it. One of our knowledgeable local brokers can assist with this – along with any other insurance requirements on the farm.
 https://www.nfumutual.co.uk/farming/farming-diversification/ (Farming Diversification Report 2020.PDF)