Administration and Data Management

Appropriate IT systems are the backbone of an efficient administration comprising inter alia policy issue, premium collection, loss payments, data management, and interface with regional branch offices and governmental entities. These systems have been developed in several countries in the last decade, taking into consideration the specific requirements of agricultural insurance and national characteristics. It might be more cost-effective to use them under licensing agreements than to develop them from scratch again. In any case, it is of the utmost importance that the system used has a properly designed database that permits the collection and storage of all-important underwriting and loss data. Over time, such a database develops into an invaluable asset, which enables product development, underwriting, and rate calculations to be performed on a technically sound basis.

In order to reduce administration work, it would be beneficial to use official data from governmental institutions on individual farmers and their crop growing areas and production.

Innovation: The Driving Force in All Development Phases

Successful agricultural insurance systems are subject to constant change, especially in the operational area. Though the structural components, once established, are relatively stable, they also need to be adapted or refined from time to time.

Agricultural insurance systems develop over years and decades from:

x Selected production sectors to all important sectors;

x Selected risks via all climatic risks to all climatic and natural risks;

x Non-individualized insurance products (e.g. index products) to individualized insurance products;

x Dominant crop types, mainly grain and oleiferous crops, via all crops with quantity cover to all crops, including specialty crops with quality covers.

Innovation is essential in order to enhance agricultural insurance systems, adapt them continuously to the needs of a changing farming sector and increase efficiency. Underwriting, product development, and loss adjustment are particular target areas for innovation.

Technology plays an important role in innovation. Key technologies leading future development will be:

x Georeference and Geographical Information Systems (GIS):

Collecting georeferenced data of insured plots and processing them with GIS will be essential in future for underwriting, loss adjustment, accumulation control, portfolio management, rate calculation and the application of remote-sensing technology;

x Remote-sensing technology:[1]

Nowadays remote-sensing technology for agricultural applications is developing rapidly: plot identification, yield estimations, and assessment of loss events and vegetation status are only examples of activities that will enhance crop insurance and other risk management tools.

A key factor will be to identify correctly the crop type and then to determine yields accurately with remote-sensing technology. It can be assumed that this will be achieved first and in the near future with cereals, oleiferous; and tuber crops for regional yields; this technology can then be used to determine the actual regional yield for area-yield products. In a next step, reliable yield determination on individual plots might be possible. If that is the case, then individual yield-based covers will also be feasible for smallholding farming.

Furthermore, insurance products using remotely-sensed vegetation indices will further gain in importance, especially for covering extensive farming such as grassland.

Remote-sensing technology will also play a major role in assessing large loss events,[2] supporting loss adjustment coordination and activities as well as national or international food and disaster aid.

x Automatic yield-recording

Combines and harvesters equipped with automatic yield recording combined with GIS are already a widespread technology in many parts of the world. For insurance applications, it is essential for the yields and the corresponding georeferenced plots to be recorded in a tamper-proof and fraudresistant manner. Only then can they be used as reliable yield declarations by insureds. Further improvements in automatic yield-recording technology and reliable data transfer will enhance the application of this technology to yield guarantee products and will contribute to improving the accuracy of yield determination and to reducing loss adjustment expenses.[3]

  • [1] Remote-sensing uses aerial sensor technology to detect and classify objects on the Earth. It records information from the ultraviolet, visible, infrared, and microwave regions of the electromagnetic spectrum with equipment such as cameras, scanners, lasers, and linear arrays. This equipment is located on aircraft or spacecraft (e.g. satellites). Visual and digital image procession is used to analyze the information obtained. (ISU).
  • [2] For instance, inundations can be monitored relatively accurately by means of radar remote sensing; yield losses can be estimated by monitoring the duration of the inundation in specific areas.
  • [3] This technology will benefit primarily large and medium-sized farms that harvest mechanically. However, it is also used by contract harvesters who also harvest on smaller farms.
 
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