From supply chain interruptions and skyrocketing input costs to increasingly extreme and volatile weather, the effects of climate change are already apparent for farmers, the consumers that depend on them and the providers that serve them.
Within the agricultural financial services sector, conventional methods and core assumptions of risk modeling and management are under strain. The simplest factors, from the cost of inputs to the global dispersal of crops, are in question. Even if farmers might have predicted developments like the 300% jump in glyphosate costs or shift of hazelnut crop production from the Mediterranean to Canada, the risk models that underpin the industry did not.
It’s clear that climate change poses new challenges, and no shortage of technology providers are claiming to offer the solution. In the sea of new technologies and science—from robotic equipment to genetic seed adaptations—it’s worth refocusing on what the industry actually needs for confident decision-making in an unpredictable environment.
At Ceres Imaging, we have spent a decade collecting billions of measurements on tens of million of acres so we could fine tune data models and help customers adapt to change. We’ve learned that these four things make the difference:
1. Greater responsiveness
To maintain actuarial soundness in rapidly changing and widely varied conditions, it’s essential that carriers in the agricultural space develop less rigid, more dynamic risk-based pricing models that reflect conditions on the ground. By definition, that requires faster and more frequent capture, processing and analysis of data.
Such responsiveness allows for a new dimension to strategic planning for financial services providers, enabling, for example, specific and localized recommendations for the optimal planting and harvesting times, ensuring optimal yields and mitigating grower losses. Policy products that better reflect the real differences in production risk based on grower strategies represent a significant opportunity for the sector—both to encourage desirable practices, such as data-driven crop management, and to buffer itself from increased risk due to the effects of climate change.
See also: Climate Change and Product Liability
2. Precision crop data
Aerial data can accurately detect temperature differences of 0.1 degree Celsius between plants, with an absolute accuracy within 1 degree Celsius. In combination with crop-specific data models, this level of detail allows us to provide crop health insights at the individual plant level to enable in-season adjustments in response to budgetary and sustainability guidelines. Growers using our crop health data average an 8% improvement in yield.
Scientific precision unlocks immediate practical benefits for carriers, too. In the aftermath of an extreme weather event, for example, insurers no longer need to involve customers in a protracted process of estimation and verification of damage to a crop. Instead, carriers can measure and assess storm impacts more quickly and accurately, expediting the claims process without risk of an indemnity payment miscalculation.
3. Efficient workflows
Discussion of automation in agriculture and adjacent industries often focuses on headline-grabbing technology like robotic harvesters or self-driving tractors. The enthusiasm for futuristic machines on the farm is understandable—but it belies the hidden potential of data-driven automation to affect day-to-day operations across the entire agribusiness ecosystem.
In building automated solutions for lenders and insurers, Ceres has found that providing precision crop boundary measurements and inventories creates a ripple effect of efficiency savings across the business. Prior to automation, an adjuster might have spent a day haphazardly traversing a territory to perform inspections, then the rest of the week filing repetitive reports. They can now begin with an optimized route, upload and share notes and photographs from the field with outside experts or colleagues and calculate claims automatically. This more streamlined process, powered by automation, saves upwards of 30% of an adjuster's time.
See also: Time to Move Climate Risk Center-Stage
4. Integrated technologies
While tools for fintech are growing more sophisticated, the deluge of variably validated field data can create its own set of challenges. Rotating among many sources of information takes time, adds unnecessary complexity and makes it more difficult to mine meaningful insights.
But it's now possible to create a dashboard that integrates, consolidates and synthesizes data from many sources. The dashboard can even seamlessly integrate insights from insurers' unique proprietary systems, combining precise aerial data, IOT field sensor feeds and satellite images.
While the increasingly visible effects of climate change do pose daunting obstacles to carriers operating in the agricultural space, existing and emerging technology can help the sector to adapt. It can generate crop data insights for efficiency savings at every stage of the business cycle: from product innovation and policy writing to crop monitoring and regulatory compliance.