Blog / Grigoris Chatzikostas / August 8, 2017
The use of Earth Observation (EO) data in the agriculture insurance (AgI) industry is still in its infancy, but the pressure for agricultural geospatial products and services, for instance underwriting, contract monitoring and various kinds of risk management is increasing.
Several global changes exert pressure on the food production chain, from the anticipated growth of human population, to climate change and more frequent and intense extreme weather events. Understanding these changes and mitigating their impacts on agriculture largely depends on regular and reliable data acquisition combined with comprehensive modelling and decision-making tools. The full EO value chain, from near real-time data collection, through processing, distribution and data exploitation, is fundamental to understanding, predicting, and making business decisions about long-term, sustainable AgI products and services.
The AgI industry, however, is now compelled to respond to a great challenge: how to choose and implement EO-based technology that is contextually appropriate, while bringing stability to agriculture production and building a profitable portfolio of AgI products and services.
In 2013, global AgI premiums increased steadily and reached a value of US$30 billion, up from US$8 billion in 2005. Analysts estimate that the market will grow to US$50 billion by 2025. Despite this recent growth, the global AgI penetration is generally low when compared to other economic sectors, illustrating an enormous growth potential.
For this immense potential to be realized, companies offering AgI need to address distinct challenges related to underwriting agriculture insurance policies, risk and damage assessment, as well as contract monitoring when designing their AgI products and services. These challenges include high operational, administrative, and monitoring costs driven by remoteness and geographic dispersion of agricultural land use and land cover, together with the high financial risks of providing insurance. Some of the ways in which EO is enhancing the AgI industry include the following:
With the proliferation of remote sensing satellites, more intense competition is likely as fresh players enter the battle for AgI market share. Many market players are now making the switch from providing raw data to delivering strategic value through unique insights and tailored solutions.
Both EO startups and mature ICT players are now tailoring their offerings to the real-world and day-to-day needs of the AgI market, adapting to and addressing their customers’ technical, commercial, organizational, and legal requirements.
The commercial EO data market, which totaled $1.7 billion in 2015 and is anticipated to total $3 billion in 2025, is often used synonymously with EO. The EO market, however, is significantly larger than this, covering, for instance, high spectral resolution infrared observing systems, or weather satellite data. The Internet of Things market brings further opportunities for sensing the Earth either in situ or remotely.
It is clear that strategic alliances and joint ventures provide a way to supplement internal assets, capabilities, and activities, with access to needed resources or processes. An example of this is the regional GEO-CRADLE networking platform. It offers a searchable database of EO stakeholders active in various thematic areas, available for networking, as well as co-development of products and services based on EO.
It can be difficult to navigate through the ever-expanding EO landscape, with sentinel missions and Copernicus in situ systems delivering vast amounts of data on agricultural land use and its changes every single day, and more than 400,000,000 open data and information resources in GEOSS portal.
The AgI industry, however, needs more than raw EO data, and is seeking deep-dive analytic products on top of EO data that will help create more reliable and economically viable AgI solutions.