Strengthening crop insurance with digital solutions
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There are challenging times ahead for crop insurance in the EMEA region. The business model of indemnity insurance within traditional markets has been tested by a series of abnormal climate-related events. The current situation calls for a revised risk assessment approach and better use of data. Mobile apps and web-based platforms offer the necessary tools to easily access and gather multiple sources of risk information.
Changing what worked in the past might not always be easy, but as Anne Lohbeck, Global Head Transportation and Agriculture at Swiss Re, says: "Recent initiatives at Swiss Re clearly show that digital technologies are offering a unique opportunity to generate tangible value across the crop insurance value chain, from improving risk assessment to reducing operational expenses and from developing more tailored insurance solutions to improving the overall customer experience".
Having eyes on the ground
Expert loss adjusting for specific crops and perils is an art in itself. Loss adjusters are relatively scarce and for many companies it is a challenge to keep the standard of loss adjustment at a consistently high level. Next-generation technologies can greatly support and improve the loss adjustment processes for traditional indemnity insurance. To promote the use of loss adjustment apps, Swiss Re, in conjunction with several other insurance companies, is successfully working with start-up company GreenTriangle. Satellite data and real-time hazard maps guide the loss adjuster to representative parts of the fields through area clustering maps and offline mode. Capturing geotagged images during the field survey creates transparency and allows for a second opinion at head office. Digital processes and loss reports and online dashboards enable companies to optimise their business and loss adjusters' allocation.
Besides, Agro underwriters and claims managers increasingly use real-time weather dashboards to find the most accurate weather information on insured fields. Detailed weather data can give insights into the likelihood of hail, drought, frost, rain or storms that may take place during the crop season. Information on the exact time and severity of these events allows for more accurate risk monitoring, loss adjustment and fraud detection.
Knowing the risks, avoiding portfolio over-exposures to certain climatic hazards or just setting appropriate rates in both high and low risk zones can be a key competitive advantage for crop insurers. Based on historical weather and satellite data going back five decades, Swiss Re developed a new Agro analytics platform. Insured portfolios can easily be uploaded to the platform and a risk score for selected climatic hazards is calculated. The platform allows underwriters to better select risks and steer their agro portfolio. On a detailed scale, risk zones are identified for different perils and the frequency and severity of abnormal climate events are automatically calculated.
Going fully parametric
The frequency of severe droughts is increasing in the EMEA region and farmers are not always in a position to find suitable insurance products to cover their crops against drought. Fully parametric insurance against drought is an efficient and scalable solution that is gaining traction among farmers, often with public support. At Swiss Re, we have developed the state-of-the-art Drought Index Solution – a satellite-based soil moisture index developed in cooperation with our partner VanderSat, a global provider of satellite-observed soil moisture data. The product is operational in several countries of the EMEA region. Furthermore, through Swiss Re web-based solutions such as Opti-Crop index tracker, farmers and insurers get daily and real-time updates on the soil moisture and insurance payout situation. We have observed that there is demand in the market for plug-and-play digital solutions, as well as farmer friendly and transparent insurance products.
Another exciting development is the movement towards hyper-local data. We will soon be able to have one weather station covering a small number of fields, due to the decreased costs of high-quality weather stations. Such localised data will allow for parametric insurance for a wider range of perils, such as excess rainfall, frost or even hail and pests. To accommodate growth in this segment, Swiss Re and insurance partners jointly developed a weather index pricer, to design weather index products for all relevant weather perils based on thousands of real-time weather stations. The pricer provides a great variety of actuarial functionality and allows real-time tracking of the index payout.
Stepping up our game
At Swiss Re, we believe the agricultural insurance industry needs to accelerate its digital transformation. Our experience over the last few years shows that cooperation with tech companies and start-ups can significantly speed up this change. Insurance companies should allocate budget and resources to develop new innovations, in order to meet the needs of a new generation of farmers.
As Anne Lohbeck rightly says: "We are working full steam towards integrating our insurance solutions, operations and sales activities into digitized Agro-service platforms. Swiss Re has a solid value proposition for our clients and will act as a reliable partner on this exciting journey".