In 2016, more than $3 billion was invested in ag-tech startups.¹ This interest is expected to grow as current innovations continue to deliver results that investors and tech users desire in product quality and profitability. But all of this progress also introduces the farming community to new exposures. These innovations will require agriculture insurance programs to adapt and diversify based on an operation’s size, specialization and complexity to cover the risks associated with the facilities, machines and crops. Let’s explore some of the latest ag-tech trends and developments, as well as the agriculture insurance implications associated with them.
New Crop Tech and Associated Agriculture Insurance Challenges
Advanced Measurement Tools – The introduction of the Global Positioning System (GPS) has enabled farmers to use precision agronomy measures and devices to monitor crop readings and better determine appropriate moisture, fertilizer and herbicide quantities. The use of this technology has led to a greater demand for more effective products, such as chemical sprays used to control resistant weeds. As a result, Dicamba (a controversial herbicide known for its ability to move across buffer zones and county roads long after its application) was reformulated to be less drift prone and gained more traction in the market. Nonetheless, several states have either banned or significantly restricted its use, and since state and insurance investigations are still open, there will likely be future agriculture insurance coverage modifications and additional restrictions in response to claims associated with this product. As precision agronomy continues to help farmers better understand their crops, we can expect the chemical world to continually respond with new and reformulated sprays that will likely have an impact on agriculture insurance policies.
Autonomous Equipment – The farm equipment industry is currently experimenting with fully autonomous vehicles that are on the brink of cutting operator workloads. However, these machines are still in a scrupulous testing phase. While today’s tractors and combines have auto-steer capabilities, the goal is to introduce un-manned tractors that can be operated remotely, day or night, allowing the operators to multitask with two or three pieces of equipment at the same time. The adoption of this technology will likely depend on lawmakers and various outside groups who will need to determine who is liable when something goes wrong. For example, if a tractor leaves a field and hits a car on a roadway, who is liable – the farmer who owns the tractor or the software manufacturer who developed the product? Determining fault can be argued a number of ways, so these questions need answers before this technology is introduced.
Urban Farming – A new contrast to large-row crop farming is the growing trend of tray / urban farming. These new-age crop producers typically operate in larger cities and utilize stacked layers of trays for growing edible crops (i.e., lettuce and herbs). Each plant’s growth and nutritional needs are monitored with specialized sensors. This method can provide fresh, organic produce that is available faster and at a competitive price, and harvesting can occur year-round. However, plant growth is entirely dependent on technology, right down to the constant demand for an electrical supply for inside lighting. Tech disturbances, such as a power outage or some other system-wide failure, could quickly jeopardize an entire urban farm. While some carriers do offer coverage for these operations, other insurance groups are waiting to study the sustainability and claim history of these farming methods.
Drones – Drones are being used more frequently by farmers to help identify and map fields, as well as monitor crop conditions. Some are equipped with lasers and ultrasonic echoing technology to assist with crop spraying, which can provide a more accurate and consistent application than traditional methods. Manufacturers have even developed systems capable of shooting pods containing seeds and plant nutrients into prepared soil. While drones can provide low-cost aerial farming assistance, there are a number of risks associated with them. Insurance coverage for commercial drone use is relatively inexpensive and can help protect farmers from large liability claims due to misuse and / or unintentional air-space violations. However, the intended use, size and weight can affect coverage availability.
Guided Growth – The advancements in ag-tech have helped to increase efficiency and production, but have also exposed the farming community to new risks that need to be understood and addressed. Current policies and limits should be carefully reviewed as new technology is introduced. Malfunctions and breakdowns could require specialized (and expensive) repairs, so broad, high-limit policies may be needed to cover these exposures. Technology will continue to evolve, and agriculture insurance markets will adapt and expand coverage options to help mitigate risk. Keeping up with these changes might be difficult, but the Agriculture Risk Services Team at SilverStone Group is ready to provide the guidance needed to protect farming operations. We understand the importance of helping things grow, and that’s what we want to help you do.
¹ “Investor Interest Cools on AgTech Startup Investments.” January 31, 2017. Fortune.com website. Accessed on September 6, 2017 at http://fortune.com/2017/01/31/agtech-investments-2016/
This article originally appeared in the 2017 | ISSUE THREE of the SilverLink magazine, under the title “Harvesting New-Ag Tech | Insurance Implications for the Future of Farming” To receive a complimentary subscription to the SilverLink magazine, sign up here.