Claims Management in Crop Insurance
CLAIMS MANAGEMENT IN CROP INSURANCE ” THE POTENTIAL BENEFITS OF “œREMOTE ANALYSIS” TECHNOLOGY
Dr. Stephan Haverkamp
Dr. Lambert Muhr
The above-average rainfall in the summer of 2002 and the ensuing crop losses in large parts of Germany, Austria and the Czech Republic were a fresh and stark reminder that weather-related losses have a wide variety of causes and effects for agricultural production.
According to a Munich Re-backed analysis carried out in 2000, excessive rainfall ranks only fourth behind drought, hail and winterkill as a cause of crop losses in German agriculture. State-backed multi-peril crop insurance systems can provide comprehensive cover against such weather-related risks. In several European countries (e.g. Spain and Portugal) variations of this concept already play a central role in agricultural risk management. This has also been the case in the USA and Canada for many years. Such schemes consequently enjoy considerable state funding. In Germany, with its traditional focus on cover against hail damage, the introduction of such a system has been debated at great length for several years now.
However, extending the scope of cover from hail to other natural perils also raises the bar as regards identifying causes and estimating losses. Specifically, this means that very different loss causes have to be clearly defined and isolated. Moreover, coverage of different weather risks under multi-peril crop insurance increases the number of risks per se and thus also the number of losses that have to be identified and recorded. Ordinarily, most losses can be expected just before harvesting. The conventional method of estimating losses on the basis of scientific analysis and the longstanding experience of the loss assessors involved is a very labour-intensive business. The insurance industry is therefore investing a lot of time and effort on the development of automated processes for estimating losses. Geo-graphic information systems (GIS), which can assess crop production parameters for each location, coupled with satellite technology, offer excellent prospects in this respect.
Quick access to data via satellite
Aerial and satellite images now make it possible to quickly and easily obtain high-resolution data of agricultural areas almost anywhere in the world. Processing these data with GIS provides prompt and up-to-the-minute information about the severity and extent of damage. A comparison of the images before and after the loss event makes it possible to draw conclusions about the causes of a loss much sooner than was previously the case.
The benefits of remote analysis are greatest if applied in combination with other terrestrial information on weather, phenology or soil conditions. For example, the weather conditions at a particular location can affect the reflective properties of crop plants and thus influence the satellite image. If these factors are known, it is possible to correct the reflective values accordingly, thus allowing a far more accurate figure to be put on the actual loss of crops.
Nevertheless, various aspects still have to be considered and certain obstacles overcome in this development process. The huge number of different types of crop and the completely different ways they react to the individual perils clearly show the numerous factors that need to be taken into account. Even if this technology has not played much of a role in practice thus far, the results of the on-going project are very promising.
The Agricultural Department at Munich Re (CUGC 2.5) is confident this technology will make an important contribution to improving risk information and loss management of multi-peril crop insurance. For this reason, Munich Re actively supports specialist agricultural insurers and remote analysis companies in their efforts to develop this technology, for example by providing know-how and arranging consultancy visits by our experts.