Agriculture is the main source of income for rural areas in many countries. It is expected that by 2050, the global population will reach about 9.6 billion, so food production must be increased up to 60% in order to feed every mouth. New technological advancements in the agricultural revolution known as precision farming, are intended to solve the global food security challenge.
Due to climate change, farmers are forced to insure their crops, in order to get compensation for yield losses. By bringing data-driven decisions and following best farming practices, the goal of eliminating world hunger can and will be achieved.
Extreme Weather Risk Demands Crop Insurance
Although farmers have all the tools essential for producing enough food, they are often limited by external difficulties. Farming in the outdoor can be very challenging because farmers depend on environmental conditions, many of which are out of their control.
Most common difficulties include uncertain weather conditions, and farmers never know when their land will be affected by hail, drought, frost or extreme wind which can ultimately destroy their yield.
Having in mind that crop production is the main source of income for many farmers and that bad weather is out of their control, they have to insure their crops. In other words, they will develop a risk management strategy with a certain insurance company that ensures a certain compensation in case of crop damage.
“Since crop production is the main source of income for many farmers, they arrange crop insurance to get a compensation for the crop damage.“
How does it look in practice? A farmer plants a vineyard. Soon after vegetation starts, young leaves are threatened by early season frost. Then, after flowering, at the time of fruit setting, there is the possibility of hail. Not to mention a huge risk of pest damage during the entire season. All these events can damage the crop and drastically reduce the yield or even cause complete yield loss.
Ultimately, a farmer can’t avoid these factors. Agricultural insurance is the only safe way to financially compensate farmers who have suffered yield losses.
Digital Technology in the Service of Farmers
Due to climate change, farming has become a very challenging job. Lately, it has been responsible for unpredictable weather events and resulted in significant yield loss and overall changes in farm management. Accordingly, crop insurance became very popular among farmers.
Since digital technology became an inevitable part of precision agriculture, insurance companies can now offer something new to farmers; a more precise crop damage indexing and therefore more efficient risk management.
“Agrivi software offers insurance companies a risk management tool to decrease financial risk of their insurance policies. “
Agrivi farm management software is a unique digital agricultural solution, that offers insurance companies one central platform for reducing the risk of their agricultural portfolio and weather indexing.
How can insurances benefit from using this risk management tool? By using Agrivi software in a farmer’s agreed agricultural policy, insurance companies gain insight into:
- Weather indexing made especially for a particular farmer, according to the overview of historical agricultural risk on his fields
- Farmer segmentation based on risk, whether it be adverse weather or pest risk
- The veracity of the farmer’s claims of field damage, by using satellite images to identify the exact percentage of damaged field
- Easy overview of all farmer’s fields by real-time insight into his crop production from one central place; that way a farmer is not obligated to send reports about any changes in his fields
- Sending automated alerts to farmers to prevent hail and frost damages on fields
“Turnkey” Solution for Smart Insurance Management
To insurance companies, Agrivi offers a central place for all activities related to agricultural risk management. In other words, it provides a “turnkey” solution which allows insurances to decrease financial risk of their insurance policies.
By giving their policyholders an efficient farm management tool that helps them achieve optimal yield and by conducting satellite monitoring, insurance companies can greatly prevent inaccurate assessments and wrongful damage compensation. Therefore, Agrivi represents a cost-saving factor and offers long-term profitability increase.
Crop insurance is purchased by agricultural producers to protect themselves either against production- or revenue-related risks. Either way, they need to pay the fixed amount of the policy. That makes insurance companies a crucial element in the food supply chain.
If you are an insurance company looking to maximize profits and use new technologies to improve production efficiency, contact our Enterprise Sales team.
Image sources: Liv-ex