There are many reasons for crop failure, ranging from pests and floods to fungi and summer storms. It's no surprise that farmers want to insure themselves against these various risks as their livelihood is at stake when their crop fails. However, it is not always easy to be eligible for insurance as a farmer. In rich countries a farmer probably has a bigger chance of being able to put some money aside for insurance premiums, but in poorer areas, or poorer countries, farmers might not have access to insurance and will be relegated to a loan shark when their crops fail, pushing them into a downward spiral. Insurance is a great tool to prevent this, but it is a tool with even greater potential than it already has.
Insurance is important to farmers and will become more and more widespread in poorer areas of the world in the coming years. No one else than Narendra Modi has this week called upon the various states in India to push for a widespread adoption of crop insurance (http://www.business-standard.com/article/economy-policy/states-should-encourage-farmers-to-adopt-crop-insurance-soon-says-modi-116011800852_1.html). There will be more of these catalyzers that will grow the demand for crop insurance products. And this will open up the opportunity for insurance companies to not only help farmers but also help biodiversity, soil resilience and the natural capital of the world on a grand scale.
And the opportunity is there for the taking. Narendra Modi has also called upon the various states of India to designate zones for organic farming. It might be unclear what he means exactly, be it less pesticides, more crop rotation, less fertilizer use or avoiding the creation of a green desert, but there is no reason for insurers to not follow suit and pro-actively ask farmers to move to more sustainable practices. Insurance products could be linked to sustainability goals with discounts on premiums for those farmers who focus on reduced pesticide use, improved crop rotation and more targeted use of fertilizer. Why? Because all these practices reduce other risks for insurers. Less pesticide means that the products that leave the farm, the soil and the areas around the farm are less toxic, reducing health risks which will express themselves in higher (insured) health care costs and reducing litigation risk against the farmer using excess pesticide. Reducing the use of excessive fertilizer in tandem with crop rotation (which for example helps reducing the need for nitrates) will reduce fertilizer run-off and keep the soil and surrounding land and waterways healthy. This will express itself in a reduced risk of flora and fauna in waterways experiencing mass die-off due to excess algae growth, which again impacts the ability to fish, which affects the food intake of local population which affects their health. A third, ensuring that farmers do not create a green desert in the areas where they farm, will reduce the risk of crop loss to a specific pest, be it an insect or a fungus. The additional benefit is that the reduction of green deserts will improve biodiversity of flora and fauna in an area, which also brings benefits for people and nature. There are more opportunities that can be presented but these three already show that this would be a win-win approach for humans and nature.
However, this approach asks of insurers to take a step into a new direction where one looks at systems as a whole and not at specific parts of a system. Then again, the potential gains for human health and biodiversity are huge. It might be time to take that step.
Category: Funding longer lives, Food security, Climate/natural disasters