Agricultural insurance is a business transaction based on the quantification of risk. The basis for all calculations of risk exposure in agriculture is sound data. Lack of data makes insurance companies shy away from agricultural insurance,  either because the uncertainty makes it impossible to calculate risk or because the cost required to generate data makes the business model unviable.

 

Generating data and making that data available to insurance companies is a key contribution from the public sector to the development of agricultural insurance. Insurers should have a right to access data that has been generated with taxpayers’  money, for example, weather data generated by state meteorological administrations.

 

Providing this data for free to insurance companies is a  smart way for governments to provide fiscal support for agricultural insurance. The government avoids market distortions and contributes to the competitive business environment by granting all insurance companies, public and private, equal access to data. The key rationale for providing data free of charge is that insurance companies incur less cost when developing products or monitoring the performance of their products, and, thus, are able to offer lower premium rates to farmers.