Casey Roberts | March 7, 2024
Dismissing the concept, the need, and the subsequent application of more technology in the world of farms and agriculture is simply mistaken and short-sighted. Let's take a brief look at the development of precision agriculture (PA), how it has grown to date, any particular concerns that may need to be addressed from the insurance side of things, and a bit more.
Here are a few definitions of PA.
One will note that, regardless of the source of the definition, the following items are consistently considered in each.
According to multiple sources, we can trace the "beginning" of PA to both the US Air Force and John Deere. While they may be viewed by some as pioneers in this area, they were not the sole drivers in the practice of PA.
The Rockwell International group developed one of the first PA applications using a global positioning system (GPS). 1 However, they couldn't have done so without the development by the military of reliable GPS.
GPS first became fully operational in April 1995. 2 It actually can be traced back to efforts by the US Navy and its usage of longitude and latitude in tracking their positions. However, the system did not use three dimensional measurements as GPS does. While the Navy was using what it had developed, the Air Force and Army also had satellite navigation projects underway. These individual efforts were eventually merged into one group effort that would track in three dimensions: longitude, latitude, and altitude. Thus, GPS was developed.
It was at this same time that Rockwell was using its knowledge of military satellites to develop its Vision System, also introduced in 1995. This system created field maps. Rockwell then connected computers to a combine and recorded the volume of the crop harvested and paired that data with locations harvested. That information allowed a farmer to know which plots of land were more productive than others. The rest, as is often said, is history.
John Deere then developed technology by teaming with Stanford University engineers to develop an autonomous tractor controlled by GPS to avoid overlap in field functions. During that time, John Deere was also working on Autotrac, an autonomous tractor. According to John Deere, self-guided systems now farm approximately 60–70 percent of the crop acreage in North America.
Perhaps a map as provided by the US Government Accountability Office (GAO) will assist in an overview.
Source: US GAO summary of data reported in 2023 by the USDA; Map Resources (map) GAO-24-105962.
It is important to note that, according to USDA information available in 2023, only 27 percent of US farms and ranches use PA practices for their livestock or crop management. Simply stated, the smaller the farm operation, then the less likely the operation will utilize PA. It is really a need and function of larger farm operations.
While farm size continues to grow in the United States (the average-sized farm in the United States as of 2022 was 446 acres as opposed to 440 acres in the early 1970s), the number of farms continues to shrink (from some 2,082,440 in 2014 to 2,012,000 in 2021). In some areas and depending on the crop in question, the break-even line for PA seems to be near the 900-acre mark.
If a farm is viewed as a "food factory," then PA is about breaking down each area of that food factory to manage it on a smaller scale but subject to the pricing and production leverage given to a larger farming operation. It allows farmers to break their farms into grids or sections (as small or as large as the farmer may desire) and then to manage each to its highest benefit and production.
In a world where population continues to grow and where farmland is expected to continue to be less and less available, PA is a needed solution for better and more effective farm production.
Many of the pros may seem fairly obvious, even to those who may have limited experience in farms and farming practices.
Well, what about the cons?
Each of these areas of concern are addressed in more detail in a January 31, 2024, article published by the US GAO titled "Precision Agriculture: Benefits and Challenges for Technology Adoption and Use."
Let's review a number of these technologies.
From a property insurance perspective, most farms rely on specific farm property coverage forms. When it comes to farm personal property, the main form used is promulgated by the Insurance Services Office, Inc. (ISO), Farm Property—Farm Personal Property Coverage Form (FP 00 13 04 16).
This form allows the insured to choose between a "scheduled" (Coverage E) approach or an "unscheduled" (Coverage F) (blanket) approach to insuring equipment. While there are benefits to each, most farmers will often take a scheduled approach, as that then allows them to actually see—from an insurance perspective—which items are insured and which are not because they have a list of those items shown on their declarations pages.
When scheduling, it is what you would expect—a list of items described with a value attached to each. This value is essentially a determinant in the costs to insure the specific item as any future loss settlement will be on an actual cash value (ACV) basis as of the value of the item at the time of loss.
The coverage form allows the insured to take care of owned equipment, leased equipment, and equipment that may be rented or borrowed. Of course, a detailed list of items to be insured is a prerequisite for proper insurance. There is also the opportunity to insure smaller items of lesser value or miscellaneous equipment (say less than $3,000 per item) on a blanket basis.
If the farmer chooses an unscheduled approach, there are a few key items to remember.
Regardless of which insurance approach is taken, it is important to remember that unless otherwise endorsed, any loss will be adjusted on an ACV basis. Finally, one should not solely rely on their understanding of the FP 00 13, as it is used in conjunction with at least two other applicable property insurance forms, both of which will impact coverage: Causes of Loss Form—Farm Property (FP 10 60 04 16) and the Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions (FP 00 90 04 16). All three of these forms will need to be reviewed collaboratively for a full understanding of how coverage may or may not apply.
A third option does exist, and that is the Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30 04 16). This is a fully self-contained form with its own causes of loss. Coverage can be provided on either a blanket or specific basis. When it comes to "property not covered," the list is brief and excludes the following types of items.
One advantage in using this coverage form is the availability of the Replacement Cost—Mobile Agricultural Machinery and Equipment (FP 05 21 04 16) endorsement. This endorsement does require 80 percent coinsurance. As long as that requirement is met, then the loss would be paid based on the lesser of the following.
Failure to meet the 80 percent coinsurance requirement would result in either an ACV loss settlement or a proportional adjustment of the loss.
Regardless of the property coverage form used, unless a "drone" meets the "model or hobby aircraft" exception as shown in the Farm Property—Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form (FP 00 12 04 16) (which, if it is being used by the farmers for their farm operation, it will not), then no property coverage would apply.
For liability purposes, we'll focus on the Farm Liability Coverage Form (FL 00 20 04 16). This is the primary form used for insuring the liability exposures of most farm operations. Some may choose to utilize a commercial general liability (CGL) coverage form, but for our purposes, the information discussed here would for the most part be applicable if the farmers were using the CGL to insure the farm operation too.
Of primary concern is if the insured's operations meet the definition of "farming" as found in the FL 00 20 04 16 form? Here is that definition:
8. "Farming":
- a. Means the operation of an agricultural or aquacultural enterprise, and includes the operation of roadside stands, on your farm premises, maintained solely for the sale of farm products produced principally by you. Unless specifically indicated in the Declarations, "farming" does not include:
- (1) Retail activity other than that described above; or
- (2) Mechanized processing operations;
- b. However, "farming" does not include the operation of:
- (1) Any "agritainment" on your farm premises; or
- (2) Any retail activity or any mechanized processing operations performed, in whole or in part, for "agritainment."
Insurance Services Office, Inc., Farm Liability Coverage Form (FL 00 20 04 16), © 2015
If the insured's operation meets this definition (and subject to all of the other applicable considerations such as exclusions, conditions, and the like), then coverage should be available for the insured's "farming" operations.
Of course, we should not be surprised to find exclusions that apply to the following.
As to the use of the farmer's tractors and other farm-related equipment—autonomous or not and including robotics—there should not be a liability coverage issue. After all, those items are just "farm machinery and equipment" and, as such, will meet the definition of "mobile equipment." The pertinent part of the "mobile equipment" definition that is concerning is:
16. "Mobile equipment" means the following, including any attached machinery or equipment:
- a. Bulldozers, forklifts and tractors designed for use principally off public roads;
- Other farm machinery designed for use:
- (1) Principally off public roads; and
- (2) As implements for cultivating or harvesting;
- b. Vehicles while on premises you own or rent;
- c.Vehicles that travel on crawler treads, except that snowmobiles are "mobile equipment" only while on an "insured location" or any premises you own or rent….
Insurance Services Office, Inc., Farm Liability Coverage Form (FL 00 20 04 16), © 2015
Do not forget that if the insured is hiring a third party to provide "crop dusting" operations (be it from an airplane, helicopter, or drone), then the Coverage for Physical Injury to Crops and Animals Due to Certain Crop Dusting Operations Performed by Licensed Independent Contractor by Aircraft (Limited Crop Dusting Coverage) (FL 04 44 04 16) endorsement is needed.
PA can be an all-encompassing term for multiple approaches to operating a farm or agricultural enterprise. It is about increasing crop yields with no increase in the amount of land available to be farmed. Regardless, the end goal is the same: better management equals better results.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Footnotes