Understanding how technology is changing farming and insurance coverage

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One U.S. farm can feed 166 people annually. Demands on agriculture are growing, though: With global population forecast to increase by 2.2 billion by 2050, farmers will need to grow about 70% more food than what is currently produced, reports the Farm Bureau Federation.

It’s no wonder then that farmers have turned to robotics and other technology to improve their agricultural operations. Robotics is bringing efficiency into labor-intensive operations, giving time back to the farmer.

From robotic milking of dairy cows to GPS tracking of herds for breeding, to drone spraying of fertilizers and chemicals, technology used today is changing the risk management environment for farms.

And insurance agents and brokers need to keep up so they can best guide clients. Agents can play a pivotal role in helping agriculture clients’ insurance programs protect the opportunities afforded by technology.

Here are three examples of agricultural technology and how insurance plays in.

1. Robotic milking. The dairy industry now widely uses robots to, yes, milk cows (and even clean the dairy barn). Dairy farmers use systems that tag the cow’s ear with a device that reads the animal’s presence when it enters the milking stall. The milking robot cleans the udders (to prevent mastitis), then attaches the milking device, which measures the volume of milk produced and stops milking when appropriate. The machinery also allocates a blend of feed customized for that cow into the trough in front of the cow, which she eats while being milked.

That computerized machinery — much of it manufactured overseas — is of tremendous value to the dairy farmer. Damage or loss of that machinery by fire or poor weather would be significant for a farm operation.

Other risks center on disruption of operations and equipment breakdown. For instance, if a robotic milker goes down, the dairy farmer will need contingency plans for continuing to milk the herd to prevent production losses. (Note: There are mobile milking vendors that can step in.) With interruptions to agricultural operations, farmers and animals are at risk if this type of machinery becomes inoperable for an appreciable period.

2. RFID-based breeding. Using technology that is similar to robotic milking, swine farmers are using automated machinery to track locations and status of their breeding stock – setting up their operation to automatically route animals based on their gestational periods and feeding needs.

The technology can indicate when a sow is ready to be bred and guide the animal into the breeding area. This has removed some of the guesswork previously involved in breeding animals for production.

As with robotic milking, machine-based breeding operations have an equipment breakdown risk. The value of buildings for farms with these types of technology tend to be higher than for farms with manual systems.

3. Drone crop spraying. Spraying pesticides on crops has always been time and resource intensive, but drones are improving the process. Farms of significant size have started to replace conventional airplanes and helicopters with drones that are 8 to 10 feet wide. The drones can spray closer to the ground, reducing errors, variances in coverage and waste.

It’s now a common site for vendors to drive trailers up to a farm location and launch drones to spray farm fields. But drones in farming may present property and liability risks.

Any agent serving the ag market must work with a carrier’s underwriting team to assign the right property values to machinery and other insured farm assets. In the past few years, those values have faced upward pressures from inflation and supply chain snags. Valuing the assets properly is a significant step in the risk management process; a $100,000 technology system covered with only $10,000 of insurance will present problems for the insured, agent and carrier alike.

For the equipment breakdown portion of the risk, robotic machinery parts and repair may be affected by supply chain snags. Business interruption always is a risk to consider in agriculture.

Of note, in addition to crop spraying, drones are also useful in diagnosing agricultural risks and dealing with claims, as insurance carriers use them for inspections.

How to help
For agents who are serving farmers, it’s vital to:

1.      Recognize and identify the risks in play.
2.      Make sure clients are insured to value with the proper coverages, especially with adequate insurance for business income and extra expense.
3.      Guide clients to have contingency plans in place.
4.      Step in and step up when claims occur.

Dwight D. Eisenhower said, “Farming looks mighty easy when your plow is a pencil, and you’re a thousand miles from the cornfield,” but at least new technology can help make the process a little easier for today’s farmers.