Major innovations in farming technology could potentially drive down the cost of premiums and claims, industry experts believe.
Researchers in the US are developing ‘pinkhouses’ – similar to greenhouses – which can reduce energy costs and boost crop growth rates by 20%. Rather than relying on natural light, the crops grow under LED lights, which emit a pinkish glow. Researchers believe the pinkhouse method will not only reduce greenhouse gases, but say LEDs use 25% less energy than traditional lamps.
Industry experts believe this latest piece of innovation could bring down the cost of insurance.
“Anytime there’s a change to the parameters of a business, the type of insurance required and the cost of premiums can be implicated,” Charles Stewart, account executive from OAMPS Melbourne commercial and industry, said. “If LED lights are more expensive to replace then that could impact the sums insured, but on the other hand the growers would likely be saving significantly in their energy costs to offset this disparity.
“Additionally, the companies using pinkhouses in the US are using a warehouse-style building to house their plants, which does not carry the same risks as the traditional glass houses, which can be severely damaged in hail or high winds.”
Stewart said most of OAMPS’ clients were “waiting to see what kind of results some of the pioneers experience to determine if it is worth making the significant investment”.
Heath Amber, managing director of Millennium Underwriting Agencies told Insurance Business such technology would be a “safer bet” for insurers when providing cover for intensive industries such as herbs and vegetable growing.
“Traditional farm insurance covers would not be appropriate. Cover for infrastructure and another for the crop – probably a multi-peril type – would cover possible losses.
“This [type of farming] would be a safer bet for the insurer than a multi-peril on a broad acre scale as a result of the ability to manipulate the environment – major disasters in plant loss should be very rare. That being said, crop loss would coincide with a greater disaster such as fire, equipment failure, and maybe espionage in pinkhouses.”
Amber said, however, he cannot envisage a shift in production in broad acre farming. “The scale of production and logistics is too big and as a result of continuous advances in yield, an enormous increase in production would be required to make it financially viable,” he said.