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Thanks to crop insurance, farmers will not lose financial liquidity

Dzięki ubezpieczeniom upraw rolnicy nie utracą płynności finansowej
  • The year 2024 is a special one for VEREINIGTE HAGEL (VH). The company's origins go back 200 years.
  • Many years of experience have helped the company specialize in crop insurance.
  • The climate is changing, agriculture is evolving, and the approach to damage control methods must also follow these changes. How do the experts from VEREINIGTE HAGEL (VH) approach the subject?
  • VH in Poland focuses on developing a network of qualified experts, and also operates on the principle of a mutual insurance company. Thanks to this approach, a kind of partnership is created between the farmer and the insurance company.

The year 2024 is a loss year. Many weather anomalies have been recorded throughout Europe, which have affected the course of vegetation and ultimately also shaped production results. Crop insurance has been in practice for over two centuries. More and more agricultural producers see it as a protection for their farms against loss of financial liquidity. This has been particularly visible in recent years, when weather anomalies have become a permanent part of crop production. As it turns out, however, despite numerous offers of agricultural insurance on the market, not all of them meet the expectations of farmers. This industry is specific and requires experienced experts who can assess the actual extent of damage. Not all of the companies offering such a range of insurance today are well prepared for this. Therefore, not only the offer is important here, but also the team of experienced experts standing behind it. We talk about the specificity of agricultural insurance, specialization in this area and gaining extensive experience in the insurance industry with Michael Lösche, Managing Director of VH Polska.

Michael Lösche, Managing Director of VH Polska, photo VH Polska Michael Lösche, Managing Director of VH Polska, photo VH Polska Empty ears are the result of spring frosts. Grain will not be harvested from damaged plantations.

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Empty ears are the result of spring frosts. Grain will not be harvested from damaged plantations.

Crop damage in 2024

Farmer.pl: The year 2024 has brought numerous losses to European agriculture from the very beginning. What are the most significant for crop production this season?

Michael Lösche : I have been working in this industry for over 30 years, and the last 10 have been a continuous kaleidoscope of extreme weather phenomena. In the past, hailstorms played the most important role, with the risk of poor winter survival occasionally appearing, and in recent years it has become a mix of many adverse phenomena that often surprise with their scale, size and timing. This means that business in the open air has become exceptionally uncertain and unpredictable. A farmer is an entrepreneur who manages risk throughout the entire production process. That is why insurance has become an indispensable element of his farm management strategy. This year, the spring frosts were the biggest surprise, damaging winter rape on a large scale, and locally also winter cereals and orchards. They occurred in Poland, but also in the Netherlands and Belgium. In France and Germany, they additionally damaged many vineyards. In turn, during the harvest (at the end of July this year), very heavy rainfall occurred in Latvia and Lithuania. Often, 100-150 mm/m2 fell in a short time, which caused crops to be flooded and submerged, and in many cases, lodging occurred. The problem affected over 100 thousand ha during the harvest season. In this situation, there was a need for quick damage elimination. Due to the fact that our experts from branches in other countries had time, we decided to send an international team to those areas to help quickly assess the damage. In a period such as harvest, such support is extremely important, because the damage must be assessed in a short time on large areas.

Tragedy at our neighbors. Flood instead of harvest

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Tragedy at our neighbors. Flood instead of harvest

Climate change and crop insurance

Farmer.pl: Can the following years be similar due to climate change?

Extreme phenomena are already part of the ongoing climate change. We know that they will occur and we are certain that every now and then some phenomenon will surprise us, so even if we try our best, we still cannot fully prepare for it. Every year we are convinced that nothing is impossible for nature. Climate change is ongoing and is changing nature. This does not only apply to agriculture, but also to many areas of life. As proof of this, I often give the example of allergy sufferers suffering from hay fever every year. It appears earlier and earlier in their case, even in the winter, because the flowering dates are falling earlier and earlier. In the case of the Polish climate, the trend of changes is such that springs will generally start much earlier, and vegetation will more often creep in the snowless winter period than stop for a longer period. In such a situation, winter crops will be at risk, especially rape, which will be susceptible to the negative effects of wintering, such as scorching (the drying effect of frost), and later to the effects of spring frost. During the growing season, hail becomes more intense and also occurs in the early stages of plant development. Heavy rains are also becoming increasingly important. We know that we must now focus and consider these risk factors, because they cause the most losses during the season.

Heavy rains in a short period of time can lead to flooding of plantations, photo: VH Polska Heavy rains in a short period of time can lead to flooding of plantations, photo: VH Polska Stagnation and wetness – what does the insurer say about it? How to secure income in the 2024 season?

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Stagnation and wetness – what does the insurer say about it? How to secure income in the 2024 season?

Climate change and damage control methodologies

Farmer.pl: Are the damage elimination methodologies prepared for such weather events?

Climate change and progress in agriculture pose a huge challenge when it comes to eliminating damage. Every year is different, so the approach to estimation must be adapted to this. It is not about changing the methodology every year, but in each season, plants are affected by different factors, whether weather or agrotechnical, which are important in the context of assessing damage. Phenomena that occur on a large scale are also a challenge. In 2024 alone, as VH Polska, in the spring we had about 4.5 thousand damage reports, each report concerned from one to a dozen or so fields. In practice, this meant that our team of experts had to inspect over 20 thousand fields. You have to go to each farmer, field, fill out the appropriate documentation. This requires efficient logistics and the development of a good action plan. Therefore, the company must have a large team of qualified experts, and we can boast of one. I am proud of our team, which worked 7 days a week during the period of numerous damages or around harvest. Our experts are aware of the problems in agriculture and that inspections must be done quickly. They usually have an agricultural education and are often farmers themselves. Therefore, they perfectly understand this industry and the need to act in a nearly crisis situation.

Returning to the methodologies, they are constantly being improved, if only because of changes in nature. We work on a living organism, a plant, which in turn is affected by countless factors. Our task is not only important visual observation in the field, but also deeper reflection on the plant's reaction to stress factors that cannot be seen with the naked eye. This work also requires understanding the plant in terms of physiology, sometimes even biochemistry. You can't put it all into rigid Excel tables. We have to be flexible, because as I mentioned earlier, every year is different. In order to anticipate certain phenomena and their significance, to also develop a work methodology in case they occur on a larger scale, we also conduct many field experiments internally.

Wet snow that falls on fully vegetating plants can sometimes break them, photo: VH Polska Wet snow that falls on fully vegetating plants can sometimes break them, photo: VH Polska

Field experiments and damage elimination methodologies

Farmer.pl: You mentioned field experiments that allow for precise preparation of liquidation methodology. How are they conducted? What do they teach?

In the German branch, i.e. in the "parent" company, we have established a special department: Research and development. This team employs people who know the claims settlement process inside out, travel a lot, and collect data from estimates. Additionally, the company conducts a series of its own experiments to simulate field problems that will pose a challenge in the future. We also commission some of them to be carried out at universities and colleges. This not only gives us a full picture of the damage and its impact on the yield, but we can also observe how the plants compensate. This allows for a more precise development of the settlement methodology, and thus helps to determine the direction of changes in insurance. For example, we have recently been investigating what loss in yield can be caused by wet snowfall that falls on already vegetating plants, e.g. flowering rape. From field observations, we can see that it often causes mechanical damage to delicate organs at that time. Simulation of such experiments inspired by practical damage allows us, for example, to consider whether this damage should not be included in the scope of insurance, and if so, what the methodology for settling such damage should look like. In recent seasons, the area of legumes has also increased in Europe. In these crops, damage of economic importance is often caused by heavy rains and strong temperature fluctuations. Interestingly, depending on the species and even variety, the extent of damage varies greatly. Developing a methodology for this group of crops is also a major challenge for us at present.

Heavy rain, which causes surface runoff, may have dangerous consequences, photo: VH Polska Heavy rain, which causes surface runoff, may have dangerous consequences, photo: VH Polska

The agricultural insurance industry must constantly adapt to changes

Farmer.pl. Are new solutions, technologies, insurance offers being introduced due to climate change? In what direction is the industry heading?

Of course, new technologies provide new opportunities. We use many solutions – from simple ones that support the work of an appraiser (tablets, drones) to system solutions. We also use remote sensing solutions and satellite images. This is a very good direction, but not perfect. Digital tools are valuable support, especially in large areas, but they are not yet able to capture many details that only the skilled eye of a qualified appraiser can observe. However, these two elements complement each other well in assessing damage. And what direction is the agricultural insurance industry heading? I think that each company specialising in this area asks itself the same questions every year: how to prepare for climate change as a specialist insurer, what risks will play the biggest role in the future and how to build an attractive product for farmers to give them a sense of security and provide them with financial assistance in the event of damage.

Farmer.pl: You only insure crops, so what is the basis for such narrow specialization?

We do offer crop insurance against weather risks, but I wouldn't say it's a narrow specialization. We protect crops throughout Europe, from classic to special ones, such as fruit, vegetables or vineyards. Every year, new varieties are added, and the range of crops chosen by farmers in individual countries changes. For example, a few years ago in Poland, sunflowers or soya were practically not grown. In the last decade, our offer has also been rapidly expanding with the number of risk factors we provide protection against. In order to be able to insure and, above all, eliminate agricultural damage, a team of qualified experts is needed. Some companies think that crop insurance is a good business, some enter the market for a few years and then, after a bad year of damage, they withdraw from it. Well-trained and suitably numerous expert structures are crucial in this industry. Verification comes precisely in years when there is a lot of damage, when it occurs on a mass scale, such as frosts, or when it happens just before harvest. We have specialised in the agricultural industry, this is where our clients are, this is where our experts come from, agricultural jargon is known even to office workers, because it is the only one that comes up every day.

Hail can completely destroy plants, photo: VH Polska Hail can completely destroy plants, photo: VH Polska

Working in partnership

Farmer.pl You believe that your strong point is a team of experienced experts, who are increasingly difficult to obtain in the industry. A good expert is a farmer. Could the German model, which fully implements the idea of a mutual insurance company, be adopted in Poland? In which the farmer decides on the scope of insurance, and its members select experts from among farmers?

The principle of reciprocity works well not only in Germany, for example in the Netherlands we have two reciprocity associations uniting farmers insured with us. During the annual meetings of these bodies, among other things, weather risks, damages and possible changes in the general insurance conditions are discussed. In our opinion, such a system would also work well in Poland. Thanks to such meetings, as a specialist insurer, we can offer better products and build an even closer relationship with our customers – farmers.

Crop insurance has a history of almost 200 years. Photo: VH Polska Crop insurance has a history of almost 200 years. Photo: VH Polska

Farmer.pl: This year you celebrate a beautiful anniversary. The company has a 200-year tradition. The roots go back a long way. What does such a long experience in the industry teach you?

It is true that the beginnings of the company's activity in the European arena date back 200 years. In 1824, on the Kohren-Sahlis estate near Leipzig, Dr. Wilhelm Leberecht Crusius founded the "Hail Damage Insurance Company in the Kingdom of Saxony". For two centuries, the company has evolved dynamically. Its offer has gone beyond the borders of Germany and expanded to include new risk factors. The structures created over the years had to adapt to numerous financial, economic and geopolitical crises. The idea of a mutual insurance company has survived to this day, and we can boast such a beautiful anniversary. From the beginning, the company has been guided by one goal, namely to create a mechanism that will protect farmers from losing financial liquidity and even bankruptcy. The climate is changing, but one thing is constant: success in agriculture has always been, is and will be dependent on the whims of the weather.

Thank you for the interview.

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