Verifying Losses Requires Experience, Research

April 2017

One of the hallmarks of crop insurance is that indemnities only cover verified losses – not too much, not too little – which makes crop insurance a helping-hand for farmers instead of a profit center.

And key to the verification process is ongoing academic research and decades of industry experience, which helps adjusters accurately account for losses.

The first crop insurance industry research project dates back to the early 1920s. And that began a long tenure of studying how growing crops respond to damage from hail, wind, etc.

Dr. Mark Zarnstorff and Dr. James Houx, of National Crop Insurance Services (NCIS), discussed these crop loss adjustment procedures in a recent article published in Crop Insurance Today.

“Our agriculture researchers are continually striving to define the impacts of crop damage to improve adjustment procedures that more accurately reflect losses in an ever-changing agricultural landscape,” wrote Zarnstorff and Houx, who lead the NCIS research program.

NCIS’s research team gets ideas from field adjusters, claim supervisors, and academic researchers.  Projects typically last for three years and include several locations, and NCIS usually starts about six new projects each year.

In 2016, researchers started looking into canola pod filling, corn green snap, chickpea pod and seed numbers and cotton node removal and defoliation.

Today, NCIS has 17 ongoing research projects across 13 states from Washington to South Carolina, and from Saskatchewan, Canada, to New Mexico.

All of the research is contracted to local universities – typically extension researchers.

Academic researchers have deep expertise in specific crops across the vast agricultural landscape in the U.S.  And, since most of the researchers are state employees, they are focused on providing good information to producers.

“Having these researchers conduct the experiments means that the research is unbiased and transparent,” Zarnstorff and Houx wrote.

The academic separation gives farmers who buy coverage confidence in the insurance products and eliminates the perception that the adjustment procedure is “stacked” against them.

The research is especially important, the authors explained, as technological advances have made new crops more viable in many regions – soybean and canola, for example, have expanded dramatically in North Dakota and Oklahoma respectivley.

In addition, new management practices by farmers have improved expected yields, which must be accounted for.  One example the researchers noted was successful replanting of soybeans after the typical cutoff date of May 15.

Losses cannot be verified properly unless these changes are fully understood.

“Both the insured and insurance provider benefit from accuracy because even a 5 or 10 percent error in adjustment can result in millions of dollars in overpayments or under- payments to [insured farmers],” they concluded.  “The only way to ensure this does not occur is by maintaining a scientific research program that strives for accurate, unbiased data collection and adjustment procedures that are fair to farmers and insurance companies alike.”