Using insurance to improve food security and save farmers from rainy days

Editor’s note: This article was originally published by The Regulatory Review and is reprinted here with permission.

Insurers can help farmers manage the risk of insect contamination in their fields.

Foodborne illness is an epidemic public health problem. Centers for Disease Control and Prevention comparison Contaminated food sickens 48 million people each year in the United States, causing 28,000 hospitalizations and 3,000 deaths annually. There is nowhere and The problem is even more serious than in the fresh produce sector, where pests infect growing fields and warehouses. because the largest and most deadly epidemics in the country.

Federal lawsdevelopments in the past few years have set new standards for promoting food safety on farms. The US Food and Drug Administration is responsible for enforcing these regulations but they are missing equipment needed to manage more than 120,000 US farms plow fresh produce.

The most important help in achieving this control gap can come from a surprising source: Insurance companies.

A recently learning documents upcoming efforts by insurance agencies to monitor and ensure compliance with farm food safety standards. These efforts, if successfully scaled up, could change the way food is protected in the US, not just on farms but in the entire food industry.

Risk insurance protects policyholders from the potentially devastating financial consequences of unexpected events. Another disadvantage of insurance is that, by removing investors from the financial system, insurance removes the necessary incentive for them to be careful, which can increase the risk of accidents. Economists refer to this as the problem of moral hazard.

To solve this problem, insurers often create new incentives for policyholders to reduce risk. Many insurance courses have them he explained how insurers use different strategies to reduce risk. These strategies include discounts for policyholders who take precautionary measures and loss control advice on how to avoid potential claims.

In a survey I conducted between 2013 and 2020, 35 insurance professionals — agents, brokers, underwriters, adjusters, and adjusters — he explained how they use these and other methods to reduce the risk of food failure on farms that grow new crops.

Farmers often purchase additional insurance that includes protection against foodborne illness. For small farms, this interest rate is in bundles be a property of farm insurance, which includes a combination of farm house insurance, household goods, farm machinery and equipment, farm implements, and farm products and supplies – and may also include auto insurance. Large farms, like other businesses, often pick up otherwise known as business casualty cover, which can be sold separately or as part of a business policy.

Insurance professionals work various ways to help farmers reduce the risk of pollution in their work. For example, insurers use premiums to encourage farmers to focus on food safety. One underwriter he explained that if the insurers see a place where the farmer is failing in the protection, his underwriters “will use the debits of the trees” until a change is made, and then “they will remove them to make the tree more attractive.”

In addition to providing price incentives, insurance professionals also offer their advice on food safety insurance. According to the second author, providing advice to farmers on risk management strategies “it helps so that we have no losses and we help them to be the best in their business. “

As a form of compliance, insurance has an important advantage over government regulations. Labor pressures prevent less insurance than it does when it comes to managing government coverage. For a government agency, increased inspections create more problems on a limited budget. Conversely, as the insurance market expands, companies earn more money to support inspections. For insurers, the number of screenings provides new revenue streams. Therefore, the ability of insurance companies to monitor food safety on farms far exceeds that of government agencies.

Also insurance he is better than the traditional method of monitoring fresh produce – confidential food safety audits paid for by farmers. Disagreement that he wakes up when farmers pay for audits it undermines the credibility of the audits and reduces confidence in them. Although farmers also pay for written inspections, insurance companies have a strong incentive to ensure that these inspections are accurate, because the insurer is responsible for the costs of food safety failures. This business of insurance companies includes strong and reliable incentives that are not available in third-party food safety audits paid for by farmers.

Insurance as a tool to help farmers comply with food safety regulations is not widespread. Providing risk management advice to farmers requires the time commitment of insurance professionals that low-cost agricultural policies cannot support. Therefore, the types of risk mitigation strategies described here have been closely aligned with the core principles of small businesses with high capital expenditures. It is not common among medium and small farm insurers, as the owners of these farms can afford to buy insurance at a lower cost.

Additional research could explore ways to create risk buffers among small and medium farmers, or provide them with government support to purchase insurance, such as crop insurance. This approach can support higher coverage and increased insurance efforts to help manage food safety risks.

In the long run, food safety insurance can set a precedent for other sectors of the food industry.

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